UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-8747
CHARTWELL DIVIDEND AND INCOME FUND, INC.
(Exact name of registrant as specified in charter)
1235 Westlakes Drive, Suite 400
Berwyn, PA 19312
(Address of principal executive offices) (Zip code)
BNY Mellon
400 Bellevue Parkway
Wilmington, DE 19809
Attn: Closed-End Department
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-610-296-1400
DATE OF FISCAL YEAR END: NOVEMBER 30, 2010
DATE OF REPORTING PERIOD: MAY 31, 2010
ITEM 1. REPORTS TO STOCKHOLDERS.
(GRAPHIC)
CHARTWELL
DIVIDEND AND
INCOME FUND, INC.
SEMI-ANNUAL REPORT TO SHAREHOLDERS
DATED MAY 31, 2010
(NW LOGO) CHARTWELL INVESTMENT
PARTNERS
www.chartwellip.com
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
INVESTMENT OBJECTIVES & STRATEGY (UNAUDITED)
The Chartwell Dividend and Income Fund, Inc.'s (the "Fund") primary investment
objective is to seek high current income. Capital appreciation is a secondary
objective. The Fund will seek to achieve its objectives by investing, under
normal circumstances, at least 50% of its total assets in income generating
equity securities, including dividend paying common stocks, convertible
securities, preferred stocks and other equity-related securities. In addition,
the Fund may invest the balance of its total assets in non-convertible debt
securities, consisting primarily of corporate bonds. The Fund attempts to
minimize individual security risk by diversifying across many industries and
asset classes. The Fund is a closed-end management investment company which
trades on the New York Stock Exchange under the symbol CWF.
COMMON STOCK
The Fund invests in the common stocks of utility companies, Real Estate
Investment Trusts (REITs) and other industrial and financial companies as well
as other equity securities. Both utilities and REITs tend to offer a premium
dividend yield with steady growth that can lead to capital appreciation.
Industrial and financial stocks are primarily purchased for capital appreciation
based on the fundamental value of the underlying company.
HIGH-YIELD CORPORATE BONDS
High-yield bonds are non-investment grade corporate debt obligations rated "Ba1"
or lower by Moody's Investors Service, Inc. or "BB+" or lower by Standard and
Poor's Ratings Group; they typically have a higher risk level than
investment-grade bonds. These securities have historically compensated investors
with higher levels of income for that risk. Prices usually are less sensitive to
interest rate fluctuations than higher rated bonds because of the high income
levels. However, the prices of these bonds are more sensitive to changes in the
economy.
CONVERTIBLE SECURITIES
The Fund can invest in both convertible preferred stock and convertible bonds.
Both pay fixed rates of income, but because they can be converted into common
stock, they are indirectly tied to the common stock's performance. As a result,
convertible securities generally offer higher income than common stocks and an
opportunity for price appreciation when the value of the underlying security
rises. The Fund buys convertibles when the underlying common stock offers strong
growth potential as well.
COVERED CALL OPTIONS
The Fund is permitted to write (i.e., sell) covered call options on equity
securities (including Exchange Traded Funds) or on stock indexes. The Fund may
cover call options by: (i) owning the same security or, in the case of options
on a stock index, a portfolio of stock substantially replicating the movement of
the index underlying
2 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
(UNAUDITED)
the call option until the option is exercised or expires; (ii) segregating cash
or other liquid assets with the Fund's Custodian in an amount equal to the
current market value of the call option; or (iii) other methods consistent with
applicable laws, rules and regulations.
The writing of call options involves some investment analysis and risks that are
different from those associated with securities transactions in common stocks.
Options can seek to enhance return through price appreciation of the option,
increase income, hedge to reduce overall portfolio risk, and/or hedge to reduce
individual security risk. Writing options to seek to increase income in the Fund
involves the risk of net loss (after receiving the option premium) if the
investment adviser is incorrect in its expectation of the direction or magnitude
of the change in securities prices. The successful use of options for hedging
purposes also depends in part on the degree of correlation between the option
and a security or index of securities. If the investment adviser is incorrect in
its expectation of changes in securities prices or its estimation of the
correlation between the option and a security index, the investment performance
of the Fund will be less favorable than it would have been in the absence of
such options transactions. The use of options may increase the Fund's portfolio
turnover rate and, therefore, associated brokerage commissions.
INVESTMENT IN SECURITIES ISSUED BY OTHER INVESTMENT COMPANIES
The Fund is permitted to invest in shares of other investment companies,
including exchange traded funds ("ETFs"), to the extent permitted by the
Investment Company Act of 1940 (the "1940 Act"). ETFs are open-end investment
companies or unit investment trusts that are registered under the 1940 Act. ETF
shares are listed and traded on stock exchanges at market prices.
An investment in other investment companies involves the risk in that the price
of the shares can fluctuate up or down. Consequently, the Fund could lose money
investing in another investment company if the prices of the securities owned by
the investment company decline in value. In addition, ETFs are subject to the
following risks that do not apply to conventional open-end funds: (i) market
price of an ETF's shares may trade above or below their net asset value; (ii) an
active trading market for an ETF's shares may not develop or be maintained; and
(iii) trading of an ETF's shares may be halted if the listing exchange's
officials deem such action appropriate, the shares are delisted from the
exchange, or the activation of market-wide "circuit breakers" (which are tied to
large decreases in stock prices) halts stock trading generally.
The Fund will bear its proportionate share of any management fees and other
expenses paid by such other investment companies, which will increase the Fund's
expenses and decrease returns.
3 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
(UNAUDITED)
TEMPORARY INVESTMENTS
Temporary investments can be made for defensive purposes in response to adverse
market, economic, political or other conditions, pending investment of the
proceeds of sales of portfolio securities, or at other times when suitable
investments are not available. In addition to money market mutual funds and
cash, the Fund is permitted to temporarily invest without limit in: debt
securities issued by the U.S. Government, its agencies or instrumentalities;
commercial paper (rated "A-2" or better by S&P or "P-2" or better by Moody's,
similarly rated by another comparable rating agency or, if not so rated, of
comparable quality as determined by the Fund's Manager); certificates of deposit
or bankers' acceptances; or repurchase agreements with respect to any of the
foregoing investments. The Fund is also permitted to borrow up to 5% of its
total assets for temporary purposes.
4 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
DEAR SHAREHOLDERS (UNAUDITED),
Stock market performance during the six months ended May 31, 2010 was volatile
but ended up modestly for the period. The S&P 500 Index returned 0.40% and the
Merrill Lynch High Yield Cash Pay Index returned 6.54% while for the same
period, the Chartwell Dividend and Income Fund, Inc.'s ("Fund") market return,
including reinvested dividends, was 9.28% and the Net Asset Value (NAV) return
was 1.48%, also including reinvested dividends. These results are discussed in
greater detail later in this report. Through various portfolio transactions made
during the period, we continued to strengthen the portfolio during these
uncertain times while also positioning it for the prospect of an economic
recovery. Some of these changes are discussed in the fixed income and equity
sections of this report.
The first portion of this semi-annual period saw a 5% rally in the S&P 500 Index
on the strength of economic data and the anticipation of a strong economy in
2010. This rally was interrupted by the first hints of a debt crisis in Greece.
This news took the market down by just over 8% before a powerful rally was
sparked by news of a bailout for Greece from other European countries, stronger
domestic economic data and the belief that any Euro-zone weakness will keep
domestic interest rates low for longer than previously thought. This rally
raised the S&P 500 Index by 15.2% to a new cycle high in late April. However,
doubts about the Euro-zone debt crisis solution emerged and questions about
China's economic strength in the face of government induced tightening measures
brought about a correction of 10.5% from the high through May 31, 2010.
As the stock market is a forward-looking indicator, it appears to have begun to
discount an economic recovery. In general, we are in agreement and we believe
that the economy will continue to advance with some pauses along the way. In our
opinion, this improvement will come from, among other things, inventory
restocking, consumers continuing to increase consumption as the employment
picture gradually improves, continued low interest rates, global economic
improvement and a steep yield curve helping the banking industry. The main focus
for investors is whether this economic recovery is sustainable or will the
economy slip into a slowdown or recession. We will continue to closely monitor
the economy and markets and will endeavor to make appropriate adjustments in the
Fund's portfolio.
Please read the equity and fixed income commentary for more information and
analysis.
5 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
(UNAUDITED)
THE ABOVE COMMENTARY REPRESENTS MANAGEMENT'S ASSESSMENT OF THE FUND AND MARKET
ENVIRONMENT AT A SPECIFIC POINT IN TIME AND SHOULD NOT BE RELIED UPON BY THE
READER AS RESEARCH OR INVESTMENT ADVICE.
Sincerely,
/s/ Winthrop S. Jessup
Winthrop S. Jessup
CHAIRMAN
CHARTWELL DIVIDEND AND INCOME FUND
/s/ Bernard P. Schaffer /s/ Andrew S. Toburen
Bernard P. Schaffer Andrew S. Toburen
PORTFOLIO MANAGER PORTFOLIO MANAGER
|
PORTFOLIO MANAGEMENT TEAM
Bernard P. Schaffer Andrew S. Toburen Christine F. Williams
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
EQUITY FIXED INCOME FIXED INCOME
|
6 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
(UNAUDITED)
HOW DID THE FUND PERFORM DURING THE SIX MONTH PERIOD ENDED MAY 31, 2010?
For the six month period ended May 31, 2010, the Fund's market return was
9.28% including dividends reinvested. The Fund's net asset value (NAV)
return including dividends reinvested was 1.48%. The market, as measured by
the S&P 500 Index, was up 0.40% (including dividends) for the period having
recovered over 60% from its lows on March 9, 2009.
The Merrill Lynch High Yield Cash Pay Index returned 6.54% for the six
month period ended May 31, 2010, outperforming the 10-year U.S. Treasury
bond which returned 0.82% over the same timeframe. Volatility remained high
on the heels of the recent financial crisis. The high yield market's spread
to Treasury (or risk premium) began the period at 644 basis points in
November 2009, tightened to 451 basis points in April 2010, before widening
to 587 basis points by the end of May. The overall spread tightening
occurred while the trailing twelve month default rate as reported by
Moody's Corporation fell from 13.5% to 7.5%, as depicted in the graph
below. Moody's presently projects the high yield default rate to decline
further to approximately 2.0% over the next twelve months. At May 31, 2010
the yield on the Merrill Lynch High Yield Cash Pay Index stood at 9.18%.
HIGH YIELD SPREAD VS. DEFAULT RATES
(Source: Merill Lynch, Bloomberg)
(PERFORMANCE GRAPH)
May-86 473.40 640.00
Jun-86 444.90 635.00
Jul-86 509.70 619.00
Aug-86 505.00 613.00
Sep-86 481.20 602.00
Oct-86 467.10 588.00
Nov-86 485.60 575.00
Dec-86 501.90 569.00
Jan-87 471.35 561.00
Feb-87 435.95 568.00
Mar-87 434.14 583.00
Apr-87 411.71 596.00
May-87 372.50 382.00
Jun-87 389.27 386.00
Jul-87 394.32 359.00
Aug-87 366.05 366.00
Sep-87 356.91 389.00
Oct-87 423.10 428.00
Nov-87 457.55 427.00
Dec-87 454.60 426.00
Jan-88 482.90 476.00
Feb-88 457.90 506.00
Mar-88 436.00 476.00
Apr-88 417.60 459.00
May-88 401.50 512.00
Jun-88 401.30 460.00
Jul-88 378.80 439.00
Aug-88 378.10 451.00
Sep-88 408.00 413.00
Oct-88 429.00 425.00
Nov-88 402.40 391.00
Dec-88 405.70 348.00
Jan-89 425.20 361.00
Feb-89 407.80 314.00
Mar-89 425.50 300.00
Apr-89 451.00 262.00
May-89 482.20 224.00
Jun-89 529.90 286.00
Jul-89 573.20 335.00
Aug-89 526.80 385.00
Sep-89 557.90 440.00
Oct-89 630.40 437.00
Nov-89 645.70 482.00
Dec-89 644.60 606.00
Jan-90 627.00 628.00
Feb-90 663.00 681.00
Mar-90 655.10 689.00
Apr-90 631.00 791.00
May-90 650.60 823.00
Jun-90 634.90 817.00
Jul-90 659.90 845.00
Aug-90 710.60 889.00
Sep-90 824.80 943.00
Oct-90 903.80 970.00
Nov-90 932.40 977.00
Dec-90 933.60 985.00
Jan-91 975.00 1124.00
Feb-91 811.00 1139.00
Mar-91 720.10 1220.00
Apr-91 648.20 1178.00
May-91 643.90 1231.00
Jun-91 599.50 1279.00
Jul-91 566.80 1271.00
Aug-91 578.10 1215.00
Sep-91 623.20 1191.00
Oct-91 557.10 1108.00
Nov-91 566.60 1094.00
Dec-91 641.30 1043.00
Jan-92 489.30 920.00
Feb-92 466.90 890.00
Mar-92 429.00 801.00
Apr-92 407.20 733.00
May-92 417.10 698.00
Jun-92 418.20 644.00
Jul-92 431.00 608.00
Aug-92 436.00 613.00
Sep-92 449.20 570.00
Oct-92 457.30 619.00
Nov-92 443.00 575.00
Dec-92 457.40 494.00
Jan-93 452.90 388.00
Feb-93 452.30 405.00
Mar-93 445.60 466.00
Apr-93 432.70 491.00
May-93 410.20 459.00
Jun-93 408.90 428.00
Jul-93 403.50 442.00
Aug-93 433.70 395.00
Sep-93 443.40 393.00
Oct-93 431.80 329.00
Nov-93 395.00 322.00
Dec-93 382.70 359.00
Jan-94 322.20 362.00
Feb-94 296.30 361.00
Mar-94 309.60 299.00
Apr-94 315.70 247.00
May-94 326.30 212.00
Jun-94 330.70 194.00
Jul-94 355.70 203.00
Aug-94 348.30 196.00
Sep-94 321.80 219.00
Oct-94 314.80 224.00
Nov-94 336.60 208.00
Dec-94 343.80 191.00
Jan-95 342.20 186.00
Feb-95 336.40 134.00
Mar-95 332.40 119.00
Apr-95 318.40 163.00
May-95 344.00 185.00
Jun-95 368.10 213.00
Jul-95 337.60 221.00
Aug-95 354.90 217.00
Sep-95 373.30 227.00
Oct-95 373.70 266.00
Nov-95 386.50 317.00
Dec-95 396.40 326.00
Jan-96 366.10 326.00
Feb-96 320.70 337.00
Mar-96 325.40 343.00
Apr-96 300.40 321.00
May-96 282.40 285.00
Jun-96 305.70 284.00
Jul-96 298.40 263.00
Aug-96 275.20 221.00
Sep-96 269.80 217.00
Oct-96 296.70 195.00
Nov-96 304.80 164.00
Dec-96 265.80 164.00
Jan-97 260.30 171.00
Feb-97 243.00 159.00
Mar-97 258.10 158.00
Apr-97 270.70 137.00
May-97 243.10 160.00
Jun-97 241.30 159.00
Jul-97 241.90 184.00
Aug-97 230.20 200.00
Sep-97 233.60 206.00
Oct-97 272.10 212.00
Nov-97 265.90 227.00
Dec-97 268.60 201.00
Jan-98 271.30 207.00
Feb-98 260.80 237.00
Mar-98 260.10 235.00
Apr-98 271.30 263.00
May-98 293.40 269.00
Jun-98 350.30 296.00
Jul-98 351.40 280.00
Aug-98 501.90 269.00
Sep-98 573.30 262.00
Oct-98 612.90 266.00
Nov-98 529.80 280.00
Dec-98 554.70 341.00
Jan-99 549.70 349.00
Feb-99 507.40 359.00
Mar-99 509.60 382.00
Apr-99 464.20 420.00
May-99 467.30 480.00
Jun-99 465.00 485.00
Jul-99 443.60 532.00
Aug-99 464.90 552.00
Sep-99 488.90 584.00
Oct-99 499.40 597.00
Nov-99 469.70 585.00
Dec-99 452.60 556.00
Jan-00 460.60 553.00
Feb-00 495.50 553.00
Mar-00 583.60 567.00
Apr-00 596.10 567.00
May-00 617.80 540.00
Jun-00 614.50 555.00
Jul-00 617.00 496.00
Aug-00 641.00 521.00
Sep-00 664.20 531.00
Oct-00 756.70 496.00
Nov-00 873.90 544.00
Dec-00 880.80 615.00
Jan-01 739.00 669.00
Feb-01 728.80 709.00
Mar-01 760.10 784.00
Apr-01 738.60 803.00
May-01 703.30 809.00
Jun-01 738.80 829.00
Jul-01 744.50 890.00
Aug-01 731.20 937.00
Sep-01 913.60 971.00
Oct-01 865.20 1019.00
Nov-01 752.30 1022.00
Dec-01 734.40 1060.00
Jan-02 696.90 1089.00
Feb-02 721.60 1073.00
Mar-02 620.60 1060.00
Apr-02 600.50 1057.00
May-02 642.50 1070.00
Jun-02 781.20 1054.00
Jul-02 874.40 1033.00
Aug-02 882.40 1002.00
Sep-02 966.40 978.00
Oct-02 974.10 929.00
Nov-02 799.90 894.00
Dec-02 801.50 843.00
Jan-03 746.50 768.00
Feb-03 757.00 771.00
Mar-03 696.20 698.00
Apr-03 575.60 679.00
May-03 614.30 663.00
Jun-03 553.70 614.00
Jul-03 488.40 587.00
Aug-03 476.70 619.00
Sep-03 482.60 603.00
Oct-03 415.00 607.00
Nov-03 401.40 550.00
Dec-03 367.60 531.00
Jan-04 360.00 517.00
Feb-04 380.80 442.00
Mar-04 391.70 427.00
Apr-04 351.00 403.00
May-04 383.40 365.00
Jun-04 370.80 349.00
Jul-04 369.40 293.00
Aug-04 381.10 234.00
Sep-04 371.50 234.00
Oct-04 354.60 242.00
Nov-04 310.40 247.00
Dec-04 314.40 241.00
Jan-05 340.90 219.00
Feb-05 304.50 249.00
Mar-05 360.00 229.00
Apr-05 423.30 220.00
May-05 422.50 218.00
Jun-05 404.10 192.00
Jul-05 354.10 191.00
Aug-05 390.30 203.00
Sep-05 377.50 197.00
Oct-05 381.30 195.00
Nov-05 394.40 178.00
Dec-05 398.70 167.00
Jan-06 368.00 171.00
Feb-06 369.30 159.00
Mar-06 338.70 158.00
Apr-06 318.10 151.00
May-06 330.30 173.00
Jun-06 351.00 179.00
Jul-06 359.10 172.00
Aug-06 368.90 166.00
Sep-06 365.10 171.00
Oct-06 353.00 181.00
Nov-06 347.00 190.00
Dec-06 318.20 174.00
Jan-07 300.10 177.00
Feb-07 310.80 175.00
Mar-07 312.20 158.00
Apr-07 302.50 162.00
May-07 276.40 151.00
Jun-07 312.00 144.00
Jul-07 422.40 153.00
Aug-07 451.20 144.00
Sep-07 410.20 129.00
Oct-07 429.10 107.00
Nov-07 547.70 91.00
Dec-07 561.40 91.00
Jan-08 640.40 110.00
Feb-08 696.50 124.00
Mar-08 745.40 148.00
Apr-08 634.60 171.00
May-08 607.00 188.00
Jun-08 686.10 200.00
Jul-08 740.70 235.00
Aug-08 771.90 251.00
Sep-08 1007.40 275.00
Oct-08 1495.90 302.00
Nov-08 1872.70 332.00
Dec-08 1724.00 437.00
Jan-09 1513.00 526.00
Feb-09 1623.40 582.00
Mar-09 1576.60 785.00
Apr-09 1232.00 878.00
May-09 1037.10 980.00
Jun-09 940.20 1107.00
Jul-09 810.20 1168.00
Aug-09 794.50 1226.00
Sep-09 684.90 1310.00
Oct-09 649.30 1333.00
Nov-09 643.80 1348.00
Dec-09 523.90 1303.00
Jan-10 530.50 1254.00
Feb-10 547.60 1157.00
Mar-10 464.20 997.00
Apr-10 451.10 897.00
May-10 587.40 750.00
|
(SEE DESCRIPTION OF BENCHMARK INDICES ON PAGE 13.)
WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
The equity portion of the Fund returned 3.87% for the six month period
ended May 31, 2010 due to several factors. The Fund was positioned in high
quality, large capitalization stocks which was a winning strategy in this
volatile six month period. As can be seen on the next page, there was a
wide dispersion of returns within the S&P 500 Index. A number of groups
outperformed the S&P 500 Index but only a few of them (Industrials, REITs
and Consumer Discretionary) did so materially. The Fund's sector selection
during this period was neutral with the positive impacts of an overweight
in the Financials group being offset by an underweight in the Consumer
Discretionary group. The largest negative contribution to relative
performance came from stock selection in the Health Care group. Overall,
stock selection provided the majority of the outperformance versus the
Index with positive contributions coming from strong stock selection in the
7 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
(UNAUDITED)
Financial, Consumer Discretionary and Energy sectors. The sale of call
options was not a significant factor in performance during this period.
(PERFORMANCE GRAPH)
S&P 500 TOTAL RETURN BY SECTOR
(Six Months Ended May 31, 2010)
Energy -7.73%
Utilities -1.33%
Telecommunication Services -3.88%
REITs 18.8%
Financials (total) 1.04%
Industrials 7.84%
Basic Materials -4.43%
Consumer Discretionary 13.91%
Fin. (ex-REITs) -0.4%
Consumer Staples -0.71%
Technology 0.74%
Healthcare -5.31%
S&P 500 0.41%
|
(SEE DESCRIPTION OF BENCHMARK INDICES ON PAGE 13.)
The fixed income portion of the fund returned 4.40% for the six month
period ended May 31, 2010. As was the case in 2009, the Fund's strategy of
owning predominately higher quality BB and B-rated bonds accounted for much
of our relative performance versus the broad market. From an industry
perspective, Financial and Banking issuers outperformed while Cable TV and
Utility issuers underperformed, as seen in the following graph.
8 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
(UNAUDITED)
(PERFORMANCE GRAPH)
HIGH YIELD PERFORMANCE BY INDUSTRY
(Six Months Ended May 31, 2010)
(Source: Merrill Lynch Indices)
Financials 16.7%
Banking 13.4%
Homebuilding 10%
Transportation 8.1%
Auto 6.8%
Gaming 8.1%
HY INDEX 6.5%
Chemicals 6.4%
Steel 6%
Services 5.6%
Paper 5.6%
Consumer 5.2%
Telecom 5%
Energy 4.9%
Healthcare 4.1%
Technology 4.1%
Cable TV 3.3%
Utilities 3.1%
|
WHAT CHANGES WERE MADE TO THE PORTFOLIO DURING THE PERIOD?
The equity portion of the portfolio made some sizeable changes during the
period with the net result being an addition to the cyclicality of the
portfolio. Reductions were made in the Health Care, Financials and Energy
sectors while increases were made in the Industrials, Information
Technology and Materials sectors.
Two examples of new bond positions added to the portfolio during the last
six months include CVR ENERGY, a petroleum refiner and fertilizer producer,
and PATHEON INC., a contract manufacturer and developer of pharmaceuticals.
Sales of fixed income positions during the period included AMERIGAS
PARTNERS, HEADWATERS, and STEEL DYNAMICS, among others. As of May 31, 2010
the fixed income portion of the Fund was reasonably diversified with 63
separate positions, none of which represented more than 1.3% of the Fund's
overall assets.
9 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
(UNAUDITED)
HOW DID THE FUND TRADE RELATIVE TO ITS NET ASSET VALUE (NAV) DURING THE SIX
MONTH PERIOD?
As of May 31, 2010 the Fund was trading at a closing price of $3.79, which
is a 6.0% discount to its NAV of $4.04. At November 30, 2009, the Fund was
trading at a closing price of $3.65, which was a 12.9% discount to its NAV
of $4.19. Throughout the six month period ended May 31, 2010 the Fund
traded between a 3.1% to 14.2% discount to its NAV.
HISTORY OF FUND PRICE, NAV AND PREMIUM
(Six Months Ended May 31, 2010)
(Source: Bloomberg)
(PERFORMANCE GRAPH)
Date Price NAV
---- ----- ----
12/1/2009 3.70 4.22
12/2/2009 3.67 4.23
12/3/2009 3.69 4.22
12/4/2009 3.68 4.23
12/7/2009 3.72 4.23
12/8/2009 3.73 4.22
12/9/2009 3.70 4.23
12/10/2009 3.72 4.24
12/11/2009 3.75 4.26
12/14/2009 3.83 4.27
12/15/2009 3.83 4.22
12/16/2009 3.82 4.23
12/17/2009 3.76 4.20
12/18/2009 3.75 4.21
12/21/2009 3.75 4.24
12/22/2009 3.77 4.26
12/23/2009 3.78 4.27
12/24/2009 3.79 4.28
12/28/2009 3.77 4.28
12/29/2009 3.76 4.27
12/30/2009 3.76 4.28
12/31/2009 3.77 4.26
1/4/2010 3.86 4.30
1/5/2010 3.86 4.31
1/6/2010 3.87 4.32
1/7/2010 3.87 4.33
1/8/2010 3.94 4.35
1/11/2010 3.94 4.36
1/12/2010 3.87 4.34
1/13/2010 3.87 4.35
1/14/2010 3.85 4.36
1/15/2010 3.87 4.34
1/19/2010 3.88 4.33
1/20/2010 3.86 4.31
1/21/2010 3.83 4.26
1/22/2010 3.74 4.21
1/25/2010 3.71 4.22
1/26/2010 3.73 4.21
1/27/2010 3.69 4.23
1/28/2010 3.68 4.20
1/29/2010 3.66 4.18
2/1/2010 3.70 4.22
2/2/2010 3.76 4.25
2/3/2010 3.78 4.24
2/4/2010 3.65 4.16
2/5/2010 3.57 4.16
2/8/2010 3.62 4.14
2/9/2010 3.77 4.17
2/10/2010 3.76 4.16
2/11/2010 3.85 4.18
2/12/2010 3.84 4.17
2/16/2010 3.90 4.17
2/17/2010 3.87 4.19
2/18/2010 3.80 4.21
2/19/2010 3.79 4.22
2/22/2010 3.80 4.23
2/23/2010 3.81 4.20
2/24/2010 3.81 4.22
2/25/2010 3.84 4.22
2/26/2010 3.90 4.23
3/1/2010 3.99 4.25
3/2/2010 4.06 4.26
3/3/2010 4.14 4.27
3/4/2010 4.10 4.29
3/5/2010 4.14 4.32
3/8/2010 4.13 4.33
3/9/2010 4.07 4.33
3/10/2010 4.13 4.35
3/11/2010 4.15 4.36
3/12/2010 4.19 4.36
3/15/2010 4.22 4.36
3/16/2010 4.17 4.34
3/17/2010 4.14 4.36
3/18/2010 4.10 4.36
3/19/2010 4.07 4.35
3/22/2010 4.10 4.35
3/23/2010 4.15 4.38
3/24/2010 4.15 4.37
3/25/2010 4.13 4.33
3/26/2010 4.15 4.34
3/29/2010 4.16 4.36
3/30/2010 4.11 4.37
3/31/2010 4.10 4.37
4/1/2010 4.16 4.40
4/5/2010 4.15 4.42
4/6/2010 4.16 4.42
4/7/2010 4.12 4.40
4/8/2010 4.19 4.41
4/9/2010 4.22 4.43
4/12/2010 4.20 4.44
4/13/2010 4.18 4.43
4/14/2010 4.18 4.47
4/15/2010 4.18 4.43
4/16/2010 4.15 4.43
4/19/2010 4.21 4.44
4/20/2010 4.21 4.44
4/21/2010 4.25 4.43
4/22/2010 4.23 4.43
4/23/2010 4.23 4.45
4/26/2010 4.20 4.45
4/27/2010 4.20 4.37
4/28/2010 4.22 4.39
4/29/2010 4.20 4.43
4/30/2010 4.23 4.40
5/3/2010 4.28 4.43
5/4/2010 4.18 4.35
5/5/2010 4.14 4.31
5/6/2010 4.00 4.18
5/7/2010 3.93 4.14
5/10/2010 4.08 4.28
5/11/2010 4.00 4.26
5/12/2010 4.08 4.31
5/13/2010 4.09 4.27
5/14/2010 4.01 4.20
5/17/2010 3.97 4.20
5/18/2010 3.92 4.10
5/19/2010 3.85 4.09
5/20/2010 3.67 3.96
5/21/2010 3.74 4.00
5/24/2010 3.74 3.97
5/25/2010 3.65 3.97
5/26/2010 3.71 3.96
5/27/2010 3.76 4.06
5/28/2010 3.79 4.04
|
Date Premium/Discount
---- ----------------
12/1/2009 -12.322
12/2/2009 -13.239
12/3/2009 -12.559
12/4/2009 -13.002
12/7/2009 -12.057
12/8/2009 -11.611
12/9/2009 -12.53
12/10/2009 -12.264
12/11/2009 -11.972
12/14/2009 -10.304
12/15/2009 -9.242
12/16/2009 -9.693
12/17/2009 -10.476
12/18/2009 -10.926
12/21/2009 -11.557
12/22/2009 -11.505
12/23/2009 -11.475
12/24/2009 -11.449
12/28/2009 -11.916
12/29/2009 -11.944
12/30/2009 -12.15
12/31/2009 -11.502
1/4/2010 -10.233
1/5/2010 -10.441
1/6/2010 -10.417
1/7/2010 -10.624
1/8/2010 -9.425
1/11/2010 -9.633
1/12/2010 -10.829
1/13/2010 -11.034
1/14/2010 -11.697
1/15/2010 -10.832
1/19/2010 -10.393
1/20/2010 -10.441
1/21/2010 -10.094
1/22/2010 -11.164
1/25/2010 -12.085
1/26/2010 -11.401
1/27/2010 -12.766
1/28/2010 -12.381
1/29/2010 -12.443
2/1/2010 -12.299
2/2/2010 -11.529
2/3/2010 -10.849
2/4/2010 -12.26
2/5/2010 -14.183
2/8/2010 -12.56
2/9/2010 -9.592
2/10/2010 -9.615
2/11/2010 -7.883
2/12/2010 -7.914
2/16/2010 -6.475
2/17/2010 -7.637
2/18/2010 -9.739
2/19/2010 -10.19
2/22/2010 -10.165
2/23/2010 -9.286
2/24/2010 -9.713
2/25/2010 -9.005
2/26/2010 -7.801
3/1/2010 -6.118
3/2/2010 -4.695
3/3/2010 -3.056
3/4/2010 -4.429
3/5/2010 -4.17
3/8/2010 -4.619
3/9/2010 -6.005
3/10/2010 -5.057
3/11/2010 -4.817
3/12/2010 -3.899
3/15/2010 -3.211
3/16/2010 -3.917
3/17/2010 -5.046
3/18/2010 -5.963
3/19/2010 -6.437
3/22/2010 -5.747
3/23/2010 -5.251
3/24/2010 -5.034
3/25/2010 -4.619
3/26/2010 -4.381
3/29/2010 -4.587
3/30/2010 -5.947
3/31/2010 -6.178
4/1/2010 -5.455
4/5/2010 -6.109
4/6/2010 -5.882
4/7/2010 -6.364
4/8/2010 -4.989
4/9/2010 -4.74
4/12/2010 -5.405
4/13/2010 -5.632
4/14/2010 -6.488
4/15/2010 -5.632
4/16/2010 -6.321
4/19/2010 -5.18
4/20/2010 -5.18
4/21/2010 -4.063
4/22/2010 -4.515
4/23/2010 -4.944
4/26/2010 -5.618
4/27/2010 -3.89
4/28/2010 -3.872
4/29/2010 -5.192
4/30/2010 -3.864
5/3/2010 -3.389
5/4/2010 -3.908
5/5/2010 -3.944
5/6/2010 -4.306
5/7/2010 -5.072
5/10/2010 -4.673
5/11/2010 -6.127
5/12/2010 -5.336
5/13/2010 -4.218
5/14/2010 -4.524
5/17/2010 -5.476
5/18/2010 -4.39
5/19/2010 -5.868
5/20/2010 -7.323
5/21/2010 -6.5
5/24/2010 -5.793
5/25/2010 -8.06
5/26/2010 -6.313
5/27/2010 -7.389
5/28/2010 -5.955
|
10 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
(UNAUDITED)
CWF AS A % OF TOTAL INVESTMENTS
(As of May 31, 2010)
(PIE CHART)
Fixed Income 42.2%
Equities 57.8%
|
HOW IS THE FUND POSITIONED AT THE CLOSE OF THE PERIOD?
As of May 31, 2010, the percentage of the Fund's total investments held in
equities and fixed income was 57.8% and 42.2%, respectively. The Fund
continues to be overweight high quality, higher dividend paying securities.
As shown by the chart below, in the Equity portion of the portfolio,
securities related to the Financial sector represent the largest sector
allocation from both an absolute and relative perspective. The Financials
weighting has been slightly decreased through profit taking as the
financial markets have recovered. Technology and Consumer Discretionary are
the largest underweights within the portfolio at May 31, 2010.
FUND EQUITY ALLOCATION AS A % OF TOTAL INVESTMENTS
(As of May 31, 2010)
(PIE CHART)
Fixed Income 42.2%
Equities 57.8%
Energy 8.1%
Utilities 1.1%
Banks 4.3%
Transportation 1.4%
Telecommunications Services 2.9%
REITS 2.4%
Industrials 8.7%
Basic Materials 1.5%
Consumer Discretionary 3.6%
Financials 8.6%
Consumer Staples 5.0%
Technology 5.2%
Health Care 5.0%
|
The fixed income portion of the Fund remains diversified (as seen on the
next page) and invested primarily in `B' and `BB' rated issuers. While
credit standards appear to be loosening somewhat (as seen in the graph on
the next page), we expect demand for corporate credit to remain relatively
low unless there is an increase in the current rate of economic growth and
job creation. We are encouraged that high yield default rates have fallen
from their recent highs, but believe further declines in the default rate
are necessary for the high yield market to extend its recent gains. We
currently intend that the fixed income portion of the fund will remain well
diversified with the primary goal of contributing income to support the
Fund's monthly distribution.
11 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
(UNAUDITED)
FUND FIXED INCOME ALLOCATION AS A % OF TOTAL INVESTMENTS
(As of May 31, 2010)
(PIE CHART)
Basic Industry 2.6%
Building Materials 2.0%
Cable Television 3.0%
Consumer Products 0.9%
Energy 10.1%
Financials 2.3%
Gaming 2.2%
Healthcare 1.9%
Metals & Mining 1.4%
Paper & Forest Products 2.6%
Retail 1.9%
Services 3.7%
Telecommunications 3.8%
Transportation 0.5%
Utilities 3.3%
Fixed Income 42.2%
Equities 57.8%
|
NET % OF CREDITORS TIGHTENING STANDARDS FOR C&I LOANS
(source: Federal Reserve)
(PERFORMANCE GRAPH)
Mar-90 56.90
Jun-90 39.45
Sep-90 48.90
Dec-90 36.00
Mar-91 15.50
Jun-91 12.25
Sep-91 9.00
Dec-91 5.25
Mar-92 0.90
Jun-92 -1.70
Sep-92 4.35
Dec-92 2.65
Mar-93 -7.85
Jun-93 -19.45
Sep-93 -17.75
Dec-93 -12.95
Mar-94 -12.20
Jun-94 -6.95
Sep-94 -17.40
Dec-94 -6.85
Mar-95 -5.90
Jun-95 -6.05
Sep-95 -3.45
Dec-95 6.95
Mar-96 -0.90
Jun-96 -3.70
Sep-96 -7.80
Dec-96 -5.45
Mar-97 -6.95
Jun-97 -5.70
Sep-97 -7.00
Dec-97 1.80
Mar-98 -7.10
Jun-98 0.00
Sep-98 36.40
Dec-98 7.40
Mar-99 10.00
Jun-99 5.40
Sep-99 9.10
Dec-99 10.90
Mar-00 24.60
Jun-00 33.90
Sep-00 43.80
Dec-00 59.70
Mar-01 50.90
Jun-01 40.40
Sep-01 50.90
Dec-01 45.40
Mar-02 25.00
Jun-02 23.20
Sep-02 20.00
Dec-02 22.00
Mar-03 8.90
Jun-03 3.50
Sep-03 0.00
Dec-03 -17.90
Mar-04 -23.20
Jun-04 -20.00
Sep-04 -21.10
Dec-04 -23.60
Mar-05 -24.10
Jun-05 -16.70
Sep-05 -8.80
Dec-05 -10.70
Mar-06 -12.30
Jun-06 -8.90
Sep-06 0.00
Dec-06 0.00
Mar-07 -3.70
Jun-07 7.50
Sep-07 19.20
Dec-07 32.20
Mar-08 55.40
Jun-08 57.60
Sep-08 83.60
Dec-08 64.20
Mar-09 39.60
Jun-09 31.50
Sep-09 14.00
Dec-09 -5.50
Mar-10 -7.10
|
12 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
(UNAUDITED)
WHAT ARE THE TOP 10 EQUITY HOLDINGS BY PERCENTAGE OF TOTAL INVESTMENTS?
TOP 10 EQUITIES BY PERCENTAGE OF TOTAL INVESTMENTS
(AS OF MAY 31, 2010)
% OF TOTAL
TICKER SECURITY INVESTMENTS
------ -------------------------------- -----------
OXY Occidental Petroleum Corporation 2.9%
MET Metlife, Inc. 2.8%
JPM JPMorgan Chase & Company 2.5%
ETP Energy Transfer Partners, LP 2.1%
LTD Limited Brands, Inc. 1.9%
KBE SPDR KBW Bank ETF 1.8%
MMM 3M Company 1.8%
PFE Pfizer, Inc. 1.7%
ACE ACE Limited 1.7%
HPQ Hewlett-Packard Company 1.5%
|
DEFINITION OF THE COMPARATIVE INDICES
S&P 500 INDEX is an unmanaged capitalization-weighted index of 500 stocks
designed to measure performance of the broad domestic economy through changes in
the aggregate market value of 500 stocks representing all major industries.
MERRILL LYNCH HIGH YIELD CASH PAY INDEX is an unmanaged index of corporate bonds
that pay cash coupons, meet a minimum size threshold, and have a Merrill Lynch
composite rating lower than BBB3.
13 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
UTILIZATION OF LEVERAGE (UNAUDITED)
Until recently the Fund utilized leverage through the issuance of
commercial paper. Effective April 26, 2010, the Fund replaced its
commercial paper program with a line of credit up to $25 million and has
borrowed $20 million on the line to pay down the remaining commercial paper
and to borrow for investment purposes. The Fund's portfolio securities have
been pledged as collateral to secure this loan. The line bears a variable
interest rate equal to the 1-month LIBOR Market Index Rate plus 0.90% and
an annual commitment fee of 0.10% on the unused balance. The Fund has the
ability to leverage to a maximum of 33% of the Fund's gross assets,
measured at the time of incurrence of the loan. As of May 31, 2010, the
Fund had borrowed $20 million on the line of credit.
Borrowing for investment purposes creates an opportunity of increased
return, but at the same time, involves special risk considerations.
Borrowing increases the like-lihood of greater volatility of net asset
value and market price of the Fund's com-mon stock. To the extent that the
return that the Fund earns on the securities purchased with borrowed monies
exceeds the interest paid, the net asset value of the Fund's shares (and
the return of the Fund) will increase to a greater extent than would
otherwise be the case. Conversely, if the return that the Fund earns on the
additional securities purchased fails to cover the interest incurred on the
monies borrowed, the net asset value of the Fund (and the return of the
Fund) would be lower than if borrowing had not been used. In addition, when
the Fund borrows at a variable interest rate, there is a risk that
fluctuations in the interest rate may adversely affect the return to the
Fund's stockholders. Borrowing on a secured basis results in certain
additional risks. Should securities that are pledged as collat-eral to
secure the loan decline in value, the Fund may be required to pledge
addi-tional funds in the form of cash or securities to the lender to avoid
liquidation of those pledged assets. In the event of a steep drop in the
value of pledged securities, it might not be possible to liquidate assets
quickly enough and this could result in mandatory liquidation of the
pledged assets in a declining market at relatively low prices. Furthermore,
the investment adviser's ability to sell the pledged securities is limited
by the terms of the loan, which may reduce its investment flexibility over
the pledged securities. In addition, the rights of the lender to receive
payments of interest on and repayments of principal will be senior to the
rights of the Fund's stockholders. Successful use of a borrowing strategy
may depend on the invest-ment adviser's ability to predict correctly
interest rates and market movements, and there is no assurance that a
borrowing strategy will be successful during any period in which it is
employed.
To illustrate these concepts, assume a fund's common stock capitalization
of $100 million and the borrowing under a line of credit for an additional
$20 million, cre-ating a total value of $120 million available for
investment in long-term securities. If prevailing short-term interest rates
are approximately 3% and long-term interest rates are approximately 6%, the
yield curve has a strongly positive slope. In this example, the Fund pays
interest on the $20 million loan based on the lower short-term interest
rates. At the same time, the Fund's total portfolio of $120 million earns
the income based on long-term interest rates. IN THIS CASE, THE INTEREST
PAID ON THE LOAN IS SIGNIFICANTLY LOWER THAN THE INCOME EARNED ON THE
FUND'S LONG-TERM INVESTMENTS, AND THEREFORE THE COMMON STOCK SHAREHOLDERS
ARE THE BENEFICI-ARIES OF THE INCREMENTAL YIELD. HOWEVER, IF SHORT-TERM
INTEREST RATES RISE, NARROWING THE DIFFERENTIAL BETWEEN SHORT-TERM AND
LONG-TERM INTEREST RATES, THE INCREMENTAL YIELD PICK-UP ON THE COMMON STOCK
WILL BE REDUCED OR ELIMINATED COMPLETELY. AT THE SAME TIME, THE MARKET
VALUE ON THE FUND'S COMMON STOCK (THAT IS, ITS PRICE AS LISTED ON THE NEW
YORK STOCK EXCHANGE), MAY, AS A RESULT, DECLINE. FURTHERMORE, IF LONG-TERM
INTEREST RATES RISE, THE COMMON STOCK'S NAV WILL REFLECT THE FULL DECLINE
IN THE PRICE OF THE PORTFOLIO'S INVESTMENTS, SINCE THE AMOUNT OF THE FUND'S
OUTSTANDING LOAN DOES NOT FLUCTUATE. IN ADDITION TO THE DECLINE IN NET
ASSET VALUE, THE MARKET VALUE OF THE FUND'S COMMON STOCK MAY ALSO DECLINE.
14 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
SCHEDULE OF INVESTMENTS (UNAUDITED)
ASSET CLASS WEIGHTINGS (UNAUDITED)+:
(BAR CHART)
Common Stock 72.3%
Exchange Traded Fund 2.4%
Preferred Stock 0.0%
Corporate Notes/Bonds 54.7%
|
+ Percentages are based on total net assets of $68,262,352.
Total Investments including leverage are $88,331,352.
NUMBER OF MARKET
SHARES VALUE
----------------- -----------
COMMON STOCK--72.3%
AEROSPACE & DEFENSE--2.6%
Honeywell International, Inc. ................ 25,000 $ 1,069,250
United Technologies Corporation .............. 10,000 673,800
-----------
1,743,050
-----------
AIR FREIGHT & LOGISTICS--0.5%
United Parcel Service, Inc., Class B ......... 6,000 376,560
-----------
BANKS--3.2%
JPMorgan Chase & Company ..................... 55,000 2,176,900
-----------
BASIC INDUSTRY--1.6%
Dow Chemical Company ......................... 15,000 403,650
EI du Pont de Nemours & Company .............. 11,000 397,870
PPG Industries, Inc. ......................... 5,000 320,350
-----------
1,121,870
-----------
BEVERAGES--2.0%
Coca-Cola Company ............................ 15,000 771,000
PepsiCo, Inc. ................................ 10,000 628,900
-----------
1,399,900
-----------
COMMERCIAL SERVICES & SUPPLIES--0.7%
Waste Management, Inc. ....................... 15,000 487,650
-----------
|
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NUMBER OF MARKET
SHARES VALUE
----------------- -----------
COMMON STOCK (CONTINUED)
COMMUNICATIONS EQUIPMENT--0.5%
QUALCOMM, Inc. ............................... 10,000 $ 355,600
-----------
COMPUTERS & PERIPHERALS--2.3%
Hewlett-Packard Company ...................... 29,100 1,338,891
International Business Machines Corporation .. 2,000 250,520
-----------
1,589,411
-----------
ELECTRICAL EQUIPMENT--1.4%
Emerson Electric Company ..................... 20,000 928,800
-----------
ENERGY--10.5%
Energy Transfer Partners LP (A) .............. 41,500 1,830,150
Enterprise Products Partners LP (A) .......... 20,000 672,000
Exxon Mobil Corporation ...................... 20,000 1,209,200
General Maritime Corporation ................. 105,000 725,550
Occidental Petroleum Corporation ............. 30,800 2,541,308
Williams, Inc. ............................... 10,000 197,500
-----------
7,175,708
-----------
FINANCIAL--11.1%
ACE Limited .................................. 30,000 1,474,800
Apollo Investment Corporation ................ 40,000 417,200
Invesco Limited .............................. 30,000 556,800
Lincoln National Corporation ................. 50,000 1,323,000
MetLife, Inc. ................................ 60,000 2,429,400
Newco Star Asia Financial Limited
SPV *+(B)(C) .............................. 15,000 40,050
NYSE Euronext ................................ 20,000 573,400
Solar Capital Limited ........................ 32,175 686,615
Star Asia Financial Limited *+ (B)(C) ........ 45,000 106,425
-----------
7,607,690
-----------
FOOD & STAPLES RETAILING--1.0%
CVS Caremark Corporation ..................... 20,000 692,600
-----------
FOOD, BEVERAGE & TOBACCO--1.8%
Altria Group, Inc. ........................... 25,000 507,250
Kraft Foods, Inc., Class A ................... 10,000 286,000
Philip Morris International, Inc. ............ 10,000 441,200
-----------
1,234,450
-----------
|
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NUMBER OF MARKET
SHARES VALUE
----------------- -----------
COMMON STOCK (CONTINUED)
HEALTHCARE--6.5%
Abbott Laboratories .......................... 20,000 $ 951,200
Bristol-Myers Squibb Company ................. 55,000 1,276,550
Merck & Company, Inc. ........................ 20,000 673,800
Pfizer, Inc. ................................. 100,000 1,523,000
-----------
4,424,550
-----------
INDUSTRIAL CONGLOMERATES--3.2%
3M Company ................................... 20,000 1,586,200
General Electric Company ..................... 35,000 572,250
-----------
2,158,450
-----------
IT SERVICES--0.4%
Paychex, Inc. ................................ 10,000 285,400
-----------
LEISURE EQUIPMENT & PRODUCTS--0.5%
Mattel, Inc. ................................. 15,000 324,900
-----------
MACHINERY--1.8%
Caterpillar, Inc. ............................ 20,000 1,215,200
-----------
METALS & MINING--1.9%
BHP Billiton Limited ADR ..................... 20,000 1,296,800
-----------
MULTILINE RETAIL--1.7%
JC Penney Company, Inc. ...................... 10,000 274,900
Target Corporation ........................... 16,000 872,480
-----------
1,147,380
-----------
PERSONAL PRODUCTS--1.6%
Avon Products, Inc. .......................... 40,000 1,059,600
-----------
REAL ESTATE INVESTMENT TRUSTS--3.1%
Annaly Mortgage Management, Inc. ............. 58,900 998,944
MFA Mortgage Investments, Inc. ............... 150,000 1,099,500
-----------
2,098,444
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--2.4%
Intel Corporation ............................ 30,000 642,600
Microchip Technology, Inc. ................... 35,000 974,750
-----------
1,617,350
-----------
|
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
NUMBER OF
SHARES/
PRINCIPAL MARKET
AMOUNT VALUE
----------------- -----------
COMMON STOCK (CONTINUED)
SOFTWARE--1.1%
Microsoft Corporation ........................ 30,000 $ 774,000
-----------
SPECIALTY RETAIL--2.5%
Limited Brands, Inc. ......................... 68,300 1,697,938
-----------
TELECOMMUNICATIONS--3.5%
AT&T, Inc. ................................... 40,500 984,150
Frontier Communications Corporation .......... 125,000 993,750
Verizon Communications, Inc. ................. 15,000 412,800
-----------
2,390,700
-----------
TRANSPORTATION--1.2%
Nordic American Tanker Shipping .............. 10,000 284,000
Seaspan Corporation .......................... 50,000 534,500
-----------
818,500
-----------
UTILITIES--1.4%
Southern Company ............................. 30,000 981,000
-----------
WIRELESS TELECOMMUNICATION SERVICES--0.3%
Vodafone Group PLC ADR ....................... 10,000 201,000
-----------
TOTAL COMMON STOCK (COST $48,883,467) ........ 49,381,401
-----------
EXCHANGE TRADED FUND--2.4%
SPDR KBW Bank ................................ 65,000 1,610,050
-----------
TOTAL EXCHANGE TRADED FUND (COST $871,731) ... 1,610,050
-----------
PREFERRED STOCK--0.0%
FINANCIAL--0.0%
Solar Cayman Limited *+(B) ................... 80,000 26,400
-----------
TOTAL PREFERRED STOCK (COST $604,763) ........ 26,400
-----------
CORPORATE NOTES/BONDS--54.7%
BASIC INDUSTRY--4.3%
Aquilex Holdings LLC+
11.125%, 12/15/16 ......................... $ 500,000 502,500
H&E Equipment Services, Inc.
8.375%, 07/15/16 .......................... 1,175,000 1,141,219
United Rentals North America, Inc.
10.875%, 06/15/16 ......................... 270,000 288,900
|
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
18 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
PRINCIPAL MARKET
AMOUNT VALUE
----------------- -----------
CORPORATE NOTES/BONDS (CONTINUED)
BASIC INDUSTRY (CONTINUED)
WireCo WorldGroup+
9.500%, 05/15/17 .......................... $ 1,000,000 $ 981,250
-----------
2,913,869
-----------
BUILDING MATERIALS--1.2%
Gibraltar Industries, Inc.
8.000%, 12/01/15 .......................... 840,000 827,400
-----------
CABLE TELEVISION--3.9%
Cequel Communications Holdings I LLC and
Cequel Capital Corporation+
8.625%, 11/15/17 .......................... 1,000,000 970,000
CSC Holdings, Inc.
7.875%, 02/15/18 .......................... 550,000 563,750
Mediacom Broadband LLC
8.500%, 10/15/15 .......................... 750,000 748,125
Virgin Media Finance PLC
9.500%, 08/15/16 .......................... 350,000 360,500
-----------
2,642,375
-----------
CONSUMER FINANCE--1.1%
Credit Acceptance Corporation+
9.125%, 02/01/17 .......................... 740,000 751,100
-----------
CONSUMER STAPLES--0.4%
Dean Foods Company
7.000%, 06/01/16 .......................... 300,000 277,125
-----------
ENERGY--6.2%
Cimarex Energy Company
7.125%, 05/01/17 .......................... 650,000 650,000
Concho Resources, Inc.
8.625%, 10/01/17 .......................... 500,000 508,750
Copano Energy LLC
8.125%, 03/01/16 ........................ 935,000 906,950
Crosstex Energy+
8.875%, 02/15/18 .......................... 250,000 247,500
Linn Energy LLC
9.875%, 07/01/18 .......................... 185,000 194,250
|
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
PRINCIPAL MARKET
AMOUNT VALUE
----------------- -----------
CORPORATE NOTES/BONDS (CONTINUED)
ENERGY (CONTINUED)
Niska Gas Storage US LLC+
8.875%, 03/15/18 .......................... $ 500,000 $ 505,000
Plains Exploration & Production Company
7.625%, 06/01/18 .......................... 500,000 469,375
Range Resources Corporation
7.500%, 05/15/16 .......................... 750,000 755,625
-----------
4,237,450
-----------
FINANCIAL--1.1%
Penson Worldwide, Inc.+
12.500%, 05/15/17 ......................... 750,000 747,188
-----------
FIREARMS AND AMMUNITION--0.9%
Colt Defense LLC+
8.750%, 11/15/17 .......................... 750,000 603,750
-----------
GAMING--2.9%
MTR Gaming Group, Inc.
9.000%, 06/01/12 .......................... 700,000 549,500
Seneca Gaming Corporation
7.250%, 05/01/12 .......................... 1,000,000 987,500
Yonkers Racing Corporation+
11.375%, 07/15/16 ......................... 400,000 430,000
-----------
1,967,000
-----------
HEALTHCARE--1.0%
Omnicare, Inc.
6.875%, 12/15/15 .......................... 650,000 645,125
-----------
INTERNET SOFTWARE & SERVICES--0.8%
Equinix, Inc.
8.125%, 03/01/18 .......................... 500,000 510,000
-----------
LEISURE--0.7%
Universal City Development Partners Limited+
8.875%, 11/15/15 .......................... 500,000 497,500
-----------
LIFE SCIENCES TOOLS & SERVICES--1.5%
Patheon, Inc.+
8.625%, 04/15/17 .......................... 1,000,000 1,005,000
-----------
|
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
PRINCIPAL MARKET
AMOUNT VALUE
----------------- -----------
CORPORATE NOTES/BONDS (CONTINUED)
MACHINERY--1.1%
Cleaver-Brooks, Inc.+
12.250%, 05/01/16.......................... $ 600,000 $ 607,500
Trimas Corporation+
9.750%, 12/15/17........................... 170,000 173,400
-----------
780,900
-----------
METALS & MINING--1.8%
Cloud Peak Energy Resources LLC+
8.500%, 12/15/19........................... 1,000,000 1,000,000
Consol Energy, Inc.+
8.000%, 04/01/17........................... 250,000 255,312
-----------
1,255,312
-----------
MORTGAGE BANKS--0.7%
Provident Funding Associates+
10.250%, 04/15/17.......................... 500,000 500,000
-----------
OIL-FIELD SERVICES--3.1%
Cie Generale de Geophysique
7.750%, 05/15/17........................... 500,000 477,500
Complete Production Services, Inc.
8.000%, 12/15/16........................... 780,000 772,200
Hornbeck Offshore Services, Inc.
8.000%, 09/01/17........................... 900,000 886,500
-----------
2,136,200
-----------
OIL REFINING AND MARKETING--0.7%
Coffeyville Resources LLC+
9.000%, 04/01/15........................... 300,000 298,500
Coffeyville Resources LLC+
10.875%, 04/01/17.......................... 200,000 201,000
-----------
499,500
-----------
PAPER & FOREST PRODUCTS--4.7%
Appleton Papers, Inc.+
10.500%, 06/15/15.......................... 1,000,000 915,000
P H Glatfelter
7.125%, 05/01/16........................... 1,190,000 1,136,450
|
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
PRINCIPAL MARKET
AMOUNT VALUE
----------------- -----------
CORPORATE NOTES/BONDS (CONTINUED)
PAPER & FOREST PRODUCTS (CONTINUED)
PE Paper Escrow+
12.000%, 08/01/14.......................... $ 250,000 $ 274,200
U.S. Corrugated (B)
10.000%, 06/01/13.......................... 1,000,000 900,000
-----------
3,225,650
-----------
REAL ESTATE MANAGEMENT--0.5%
Corrections Corp of America
7.750%, 06/01/17........................... 300,000 311,250
-----------
RETAIL--2.5%
Brown Shoe Company, Inc.
8.750%, 05/01/12........................... 700,000 708,750
Couche-Tard US LP
7.500%, 12/15/13........................... 500,000 501,250
Susser Holdings LLC+
8.500%, 05/15/16........................... 500,000 496,250
-----------
1,706,250
-----------
SERVICES--2.2%
ARAMARK Corporation
8.500%, 02/01/15........................... 500,000 501,250
KAR Holdings, Inc.
8.750%, 05/01/14........................... 770,000 766,150
Mobile Mini, Inc.
9.750%, 08/01/14........................... 250,000 255,625
-----------
1,523,025
-----------
TELECOMMUNICATIONS--4.1%
Cincinnati Bell, Inc.
8.750%, 03/15/18........................... 1,000,000 930,000
Clearwire Communications LLC+
12.000%, 12/01/15.......................... 750,000 731,250
Frontier Communications Corporation
8.250%, 05/01/14........................... 150,000 154,687
Hughes Network Systems LLC
9.500%, 04/15/14........................... 1,000,000 1,000,000
-----------
2,815,937
-----------
|
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT/ MARKET
WRITTEN CONTRACTS VALUE
----------------- -----------
CORPORATE NOTES/BONDS (CONTINUED)
TRANSPORTATION--1.7%
American Petroleum Tankers LLC+
10.250%, 05/01/15.......................... $ 750,000 $ 746,250
Marquette Transportation Company+
10.875%, 01/15/17.......................... 400,000 396,000
-----------
1,142,250
-----------
UTILITIES--5.6%
AES Corporation +
9.750%, 04/15/16........................... 500,000 533,750
Edison Mission Energy
7.000%, 05/15/17........................... 650,000 442,812
Elwood Energy LLC
8.159%, 07/05/26........................... 820,703 781,720
Ferrellgas Partners LP+
9.125%, 10/01/17........................... 100,000 104,000
Ferrellgas Partners LP
6.750%, 05/01/14........................... 400,000 392,000
North American Energy Alliance LLC+
10.875%, 06/01/16.......................... 400,000 411,000
Sierra Pacific Resources
8.625%, 03/15/14........................... 750,000 775,313
Southern Star Central Corporation
6.750%, 03/01/16........................... 350,000 351,750
-----------
3,792,345
-----------
TOTAL CORPORATE NOTES/BONDS
(COST $38,269,952)......................... 37,313,501
-----------
TOTAL INVESTMENTS--129.4% (COST $88,629,913).. 88,331,352
-----------
COVERED CALL OPTIONS WRITTEN--(0.2)%
Dow Chemical Company, Expires: 06/19/10,
Strike Price: $30.......................... (50) (1,350)
Invesco PLC, Expires: 06/19/10,
Strike Price: $22.50....................... (150) (3,000)
Lincoln National Corporation,
Expires: 06/19/10, Strike Price: $34....... (250) (2,500)
MetLife, Expires: 06/19/10, Strike
Price: $47................................. (300) (2,550)
|
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONCLUDED)
WRITTEN MARKET
CONTRACTS VALUE
----------------- -----------
COVERED CALL OPTIONS WRITTEN (CONTINUED)
Microchip Technology, Inc., Expires: 06/19/10,
Strike Price: $30........................... (200) $ (3,000)
Microsoft Corporation, Expires: 06/19/10,
Strike Price: $31........................... (100) (200)
NYSE Euronext, Expires: 06/19/10, Strike
Price: $34.................................. (100) (200)
S&P 500 Index, Expires: 06/19/10, Strike
Price: $1,140............................... (200) (126,000)
-----------
TOTAL COVERED CALL OPTIONS WRITTEN
(PREMIUMS RECEIVED $193,897)................ (138,800)
-----------
OTHER LIABILITIES IN EXCESS OF
ASSETS--(29.2)%............................. (19,930,200)
-----------
NET ASSETS--100.0%............................. $68,262,352
===========
|
* Non income producing security.
+ Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration normally to qualified institutions. At May 31, 2010, these
securi- ties amounted to $15,057,075 or 22.1% of net assets.
(A) Securities considered Master Limited Partnership. At May 31, 2010, these
securities amounted to $2,502,150 or 3.7% of net assets.
(B) Securities fair valued in accordance with Fair Value Procedures (See Note
1).
(C) Security is illiquid. The total value of illiquid securities as of May 31,
2010 was $146,475 or 0.2% of net assets.
ADR American Depositary Receipt
LLC Limited Liability Company
LP Limited Partnership
PLC Public Limited Company
|
SPDR Standard & Poor's Depository Receipts
SPV Special Purpose Vehicle
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
STATEMENT OF ASSETS AND LIABILITIES
AS OF MAY 31, 2010 (UNAUDITED)
ASSETS:
Investments, at value (cost $88,629,913) (Note 1) ............. $ 88,331,352
Receivable for securities sold ................................ 225,142
Interest receivable ........................................... 765,206
Cash .......................................................... 160,888
Dividends receivable .......................................... 133,032
Prepaid expenses and other assets ............................. 43,214
-------------
Total assets ............................................... 89,658,834
-------------
LIABILITIES:
Line of Credit (Note 4) ....................................... 20,000,000
Payable for investment securities purchased ................... 909,453
Covered call options written, at value
(premiums received--$193,897) (Note 1) ..................... 138,800
Payable for investment management fees (Note 2) ............... 65,687
Payable for administration fees (Note 2) ...................... 12,740
Accrued expenses and other liabilities ........................ 269,802
-------------
Total liabilities .......................................... 21,396,482
-------------
NET ASSETS .................................................... $ 68,262,352
=============
NET ASSETS CONSIST OF:
Common Stock, $0.01 par value
(authorized 100,000,000 shares) ......................... $ 169,060
Additional paid-in capital ................................. 172,817,983
Distributions in excess of net investment income ........... (2,154,994)
Accumulated net realized losses on investments and
written call options .................................... (102,326,233)
Net unrealized depreciation on investments and
written call options .................................... (243,464)
-------------
NET ASSETS .................................................... $ 68,262,352
=============
NET ASSET VALUE PER SHARE:
$68,262,352 / 16,905,967 shares of Common Stock
issued and outstanding .................................. $ 4.04
=============
|
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
MAY 31, 2010 (UNAUDITED)
INVESTMENT INCOME:
Interest ........................................................ $ 1,560,562
Dividends ....................................................... 895,068
-----------
Total investment income ...................................... 2,455,630
-----------
EXPENSES:
Investment management fees (Note 2) ............................. 399,466
Commercial paper fees ........................................... 123,288
Administration fees (Note 2) .................................... 74,795
Legal fees ...................................................... 73,820
Printing and shareholder reports ................................ 32,229
Audit fees ...................................................... 30,702
Line of credit fees ............................................. 22,523
Transfer agent fees ............................................. 20,168
Directors' fees and expenses .................................... 13,463
Insurance fees .................................................. 12,696
Registration fees ............................................... 9,987
Custodian fees .................................................. 6,927
Other operating expenses ........................................ 11,913
-----------
Total operating expenses ..................................... 831,977
-----------
Interest expense (Note 4) ....................................... 127,903
-----------
Total expenses ............................................... 959,880
Less: Investment management fees waived (Note 2) .......... (42,177)
-----------
Net expenses .............................................. 917,703
-----------
NET INVESTMENT INCOME ..................................... 1,537,927
-----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments ................................ 1,707,092
Net realized loss on written call options ....................... (109,266)
Change in net unrealized depreciation
on investments and written call options ...................... (2,277,213)
-----------
Net realized and unrealized loss on investments
and written call options ..................................... (679,387)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $ 858,540
===========
|
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
MAY 31, 2010 (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations ......... $ 858,540
Adjustments to reconcile net increase in net assets resulting
from operations to net cash used in operating activities:
Purchase of long-term portfolio investments ............... (33,569,443)
Proceeds from sales of long-term portfolio investments .... 25,403,838
Net purchase of short-term portfolio investments .......... (43,631,272)
Net proceeds from sales of short-term portfolio
investments ............................................ 44,012,524
Net realized loss on written call options ................. 109,266
Premiums received from options written .................... 1,895,077
Premiums paid to closed options ........................... (1,834,118)
Amortization of premiums on investments ................... (20,593)
Net realized gain on investments .......................... (1,707,092)
Change in net unrealized depreciation on investments
and written call options ............................... 2,277,213
Increase in interest receivable ........................... (104,757)
Decrease in dividends receivable .......................... 42,420
Increase in receivable for securities sold ................ (225,142)
Decrease in prepaid expenses and other assets ............. 3,027
Increase in payable for securities purchased .............. 61,163
Increase in payable for investment management fees ........ 9,438
Increase in payable for administration fees ............... 411
Decrease in payable to custodian .......................... (27,812)
Increase in accrued expenses and
other liabilities ...................................... 8,739
------------
Net cash used in operating activities .................. (6,438,573)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid to shareholders .......................... (3,448,817)
Decrease in commercial paper, at value ....................... (9,951,722)
Increase in line of credit ................................... 20,000,000
------------
Net cash provided by financing activities .............. 6,599,461
------------
Net increase in cash ................................... 160,888
CASH
Cash at beginning of period ............................ --
------------
Cash at end of period .................................. $ 160,888
============
|
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
MAY 31, 2010 NOVEMBER 30,
(UNAUDITED) 2009
------------ ------------
OPERATIONS:
Net investment income ....................... $ 1,537,927 $ 3,472,300
Net realized gain/(loss) on investments ..... 1,707,092 (45,381,796)
Net realized gain/(loss) on written call
options .................................. (109,266) 1,385,878
Change in net unrealized appreciation
(depreciation) on investments and written
call options ............................. (2,277,213) 56,252,324
----------- ------------
Net increase in net assets resulting
from operations ............................. 858,540 15,728,706
----------- ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income ..................... (3,448,817) (6,607,782)
Tax return of capital ..................... -- (289,851)
----------- ------------
Net decrease in net assets resulting from
dividends and distributions ................. (3,448,817) (6,897,633)
----------- ------------
Total increase (decrease) in net assets ........ (2,590,277) 8,831,073
----------- ------------
NET ASSETS:
Beginning of period ......................... 70,852,629 62,021,556
----------- ------------
End of period
(including distributions in excess of net
investment income of $(2,154,944) and
$(244,104), respectively) ................ $68,262,352 $ 70,852,629
=========== ============
|
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
FINANCIAL HIGHLIGHTS
FOR THE
SIX MONTHS FOR THE
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE ENDED YEAR ENDED
BEEN DERIVED FROM INFORMATION PROVIDED IN THE MAY 31, 2010 NOVEMBER 30,
FINANCIAL STATEMENTS (UNAUDITED) 2009
------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD ...................... $ 4.19 $ 3.67
------- -------
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: (1)
Net investment income .................................. 0.09 0.21
Net realized and unrealized gain (loss) on investment
transactions and written call options ............... (0.04) 0.72
------- -------
Total from investment operations .................... 0.05 0.93
------- -------
LESS DIVIDENDS:
Dividends from net investment income ................... (0.20) (0.39)
Tax return of capital .................................. -- (0.02)
------- -------
Total dividends ..................................... (0.20) (0.41)
------- -------
NET ASSET VALUE, END OF PERIOD ............................ $ 4.04 $ 4.19
======= =======
MARKET VALUE, END OF PERIOD ............................... $ 3.79 $ 3.65
======= =======
TOTAL RETURN BASED ON: (2)
Net asset value ........................................ 1.48% 29.42%
======= ======
Market value ........................................... 9.28% 59.14%
======= =======
RATIOS AND SUPPLEMENTAL DATA: (3)
Net assets, end of period (000 omitted) ................ $68,262 $70,853
======= ======
Total expenses including waiver of fees ................ 2.18%(5) 2.50%
Total expenses excluding waiver of fees ................ 2.28%(5) 2.60%
Total operating expenses including waiver of fees (4) .. 1.58%(5) 1.66%
Total operating expenses excluding waiver of fees (4) .. 1.68%(5) 1.76%
Commercial paper fees and interest expense ............. 0.60%(5) 0.85%
Net investment income including waiver of fees ......... 3.65%(5) 4.71%
Portfolio turnover ..................................... 30% 73%
LEVERAGE ANALYSIS:
Aggregate amount outstanding at end of period
(000 omitted) ....................................... N/A $10,000
Average daily balance of amortized cost of commercial
paper outstanding (000 omitted) ........................ N/A $ 9,960
Asset coverage per $1,000 at end of period ............. N/A $ 7,425
|
(1) Based on average shares outstanding.
(2) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each period reported. Total investment return does not reflect brokerage
commis-sions. Dividends and distributions, if any, are assumed for the
purposes of this calculation, to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Total investment returns based on market
value can be sig-nificantly greater or less than investment returns based
on net asset value. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the sale of Fund shares.
(3) Ratios are stated as a percentage of managed net assets which includes any
liabilities constituting indebtedness in connection with financial
leverage.
(4) Exclusive of commercial paper fees and interest expense.
(5) Annualized.
Amounts designated as "--" are $0.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR THE YEARS ENDED
NOVEMBER 30,
-------------------
2008 2007
------- --------
NET ASSET VALUE, BEGINNING OF YEAR ........................... $ 8.16 $ 9.55
------- --------
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: (1)
Net investment income ..................................... 0.56 0.80
Net realized and unrealized loss on investment transactions
and written call options ............................... (4.19) (1.30)
------- --------
Total from investment operations ....................... (3.63) (0.50)
------- --------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income ...................... (0.59) (0.84)
Tax return of capital ..................................... (0.27) (0.05)
------- --------
Total dividends ........................................ (0.86) (0.89)
------- --------
NET ASSET VALUE, END OF YEAR ................................. $ 3.67 $ 8.16
======= ========
MARKET VALUE, END OF YEAR .................................... $ 2.60 $ 7.35
======= ========
TOTAL RETURN BASED ON: (2)
Net asset value ........................................... (47.75)% (6.05)%
======= ========
Market value .............................................. (58.90)% (17.19)%
======= ========
RATIOS AND SUPPLEMENTAL DATA: (3)
Net assets, end of year (000 omitted) ..................... $62,022 $137,953
======= ========
Total expenses including waiver of fees ................... 2.41% 2.69%
Total expenses excluding waiver of fees ................... 2.51% 2.79%
Total operating expenses including waiver of fees (4) ..... 1.22% 1.15%
Total operating expenses excluding waiver of fees (4) ..... 1.32% 1.26%
Commercial paper fees and interest expense ................ 1.19% 1.53%
Net investment income including waiver of fees ............ 5.97% 6.33%
Portfolio turnover ........................................ 54% 74%
LEVERAGE ANALYSIS:
Aggregate amount outstanding at end of year
(000 omitted) .......................................... $10,000 $ 55,000
Average daily balance of amortized cost of commercial
paper outstanding (000 omitted) ........................ $47,921 $ 54,790
Asset coverage per $1,000 at end of year .................. $15,880 $ 3,903
|
(1) Based on average shares outstanding.
(2) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each year reported. Total investment return does not reflect brokerage
commissions. Dividends and distributions, if any, are assumed for the
purposes of this calculation, to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Total investment returns based on market
value can be sig-nificantly greater or less than investment returns based
on net asset value. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the sale of Fund shares.
(3) Ratios are stated as a percentage of managed net assets which includes any
liabilities constituting indebtedness in connection with financial
leverage.
(4) Exclusive of commercial paper fees and interest expense.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
FINANCIAL HIGHLIGHTS (CONCLUDED)
FOR THE YEARS ENDED
NOVEMBER 30,
-------------------
2006 2005
-------- --------
NET ASSET VALUE, BEGINNING OF YEAR ........................ $ 8.65 $ 8.96
-------- --------
INCOME/GAIN FROM INVESTMENT OPERATIONS: (1)
Net investment income .................................. 0.63 0.61
Net realized and unrealized gain on investment
transactions and written call options ............... 1.20 0.08
-------- --------
Total from investment operations .................... 1.83 0.69
-------- --------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income ................... (0.93) (0.53)
Distributions in excess ................................ -- (0.01)
Tax return of capital .................................. -- (0.46)
-------- --------
Total dividends and distributions ................... (0.93) (1.00)
-------- --------
NET ASSET VALUE, END OF YEAR .............................. $ 9.55 $ 8.65
======== ========
MARKET VALUE, END OF YEAR ................................. $ 9.78 $ 10.70
======== ========
TOTAL RETURN BASED ON: (2)
Net asset value ........................................ 22.51% 8.19%
======== ========
Market value ........................................... 0.36% 18.14%
======== ========
RATIOS AND SUPPLEMENTAL DATA: (3)
Net assets, end of year (000 omitted) .................. $160,613 $144,352
======== ========
Total expenses including waiver of fees ................ 2.59% 2.90%
Total expenses excluding waiver of fees ................ 2.68% 3.04%
Total operating expenses including waiver of fees (4) .. 1.13% 1.59%
Total operating expenses excluding waiver of fees (4) .. 1.24% 1.73%
Commercial paper fees and interest expense ............. 1.44% 1.31%
Net investment income including waiver of fees ......... 5.07% 7.00%
Portfolio turnover ..................................... 96% 80%
LEVERAGE ANALYSIS:
Aggregate amount outstanding at end of year
(000 omitted) ....................................... $ 55,000 $ 55,000
Average daily balance of amortized cost of commercial
paper outstanding (000 omitted) ..................... $ 54,659 $ 54,794
Asset coverage per $1,000 at end of year ............... $ 3,980 $ 3,679
|
(1) Based on average shares outstanding.
(2) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each year reported. Total investment return does not reflect brokerage
commissions. Dividends and distributions, if any, are assumed for the
purposes of this calculation, to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Total investment returns based on market
value can be sig-nificantly greater or less than investment returns based
on net asset value. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the sale of Fund shares.
(3) Ratios are stated as a percentage of managed net assets which includes any
liabilities constituting indebtedness in connection with financial
leverage.
(4) Exclusive of commercial paper fees and interest expense.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Chartwell Dividend and Income Fund, Inc. (the "Fund") was incorporated under the
laws of the State of Maryland on April 6, 1998 and is registered under the
Investment Company Act of 1940 as amended, (the "Act"), as a closed-end,
diversified management investment company. Investment operations commenced on
June 29, 1998. The Fund's primary investment objective is to seek high current
income. Capital appreciation is a secondary objective.
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with GAAP.
USE OF ESTIMATES: The preparation of financial statements in conformity with
U.S. generally accepted accounting principles ("GAAP") requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
SECURITY VALUATION: Investment securities of the Fund that are listed on a
securities exchange, except for debt securities, and for which market quotations
are readily available, are valued at the last quoted sales price at the close of
trading on the New York Stock Exchange (normally 4:00 p.m., Eastern Time).
Investment securities of the Fund that are quoted on the NASDAQ market system
are valued at the official closing price, or if there is none, at the last sales
price. If there is no reported sale, these securities and unlisted securities
for which market quotations are not readily available are valued at last bid
price. Debt securities are priced based upon valuations provided by independent,
third-party pricing agents, if available. Such values generally reflect the last
reported sales price if the security is actively traded. The third-party pricing
agents may also value debt securities at an evaluated bid price by employing
methodologies that utilize actual market transactions, broker-supplied
valuations, or other methodologies designed to identify the market value for
such securities. Debt obligations with remaining maturities of sixty days or
less may be valued at their amortized cost, which approximates market value.
Prices for most securities held in the Fund are provided daily by recognized
independent pricing agents. If a security price cannot be obtained from an
independent, third-party pricing agent, the Fund seeks to obtain a bid price
from at least one independent broker. All securities and assets for which
quotations are not readily available are valued in accordance with Fair Value
Procedures established by the Board of Directors (the "Board"). The value of
such securities was $1,072,875 as of May 31, 2010. The Fund's Fair Value
Procedures are implemented through a Fair Value Committee (the "Committee")
designated by the Fund's Board. Some of the more common reasons that may
necessitate that a security be valued using Fair Value Procedures include, among
other things: the security's trading has been halted or suspended; the security
has been de-listed from a national exchange; the security's primary
32 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
trading market is temporarily closed at a time when under normal conditions it
would be open; or the security's primary pricing source is not able or willing
to provide a price. When a security is valued in accordance with the Fair Value
Procedures, the Committee will determine the value after taking into
consideration relevant information reasonably available to the Committee.
In accordance with the authoritative guidance on fair value measurements and
disclosure under GAAP, the Fund discloses fair value of its investments in a
hierarchy that prioritizes the inputs to valuation techniques used to measure
the fair value. The objective of a fair value measurement is to determine the
price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date (an
exit price). Accordingly, the fair value hierarchy gives the highest priority to
quoted prices (unadjusted) in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). The three
levels of the fair value hierarchy are described below:
- Level 1 -- Unadjusted quoted prices in active markets for identical,
unrestricted assets or liabilities that the Fund has the ability to
access at the measurement date;
- Level 2 -- Quoted prices which are not active, or inputs that are
observable (either directly or indirectly) for substantially the full
term of the asset or liability; and
- Level 3 -- Prices, inputs or exotic modeling techniques which are both
significant to the fair value measurement and unobservable (supported
by little or no market activity).
Investments are classified within the level of the lowest significant input
considered in determining fair value. Investments classified within Level 3
whose fair value measurement considers several inputs may include Level 1 or
Level 2 inputs as components of the overall fair value measurement.
The following table sets forth information about the level within the fair value
hierarchy at which the Fund's investments were measured at May 31, 2010:
Level 1 Level 2 Level 3 Total
------------ ------------ ---------- -----------
Investments in Securities
Common Stock $49,234,926 $ -- $ 146,475(1) $49,381,401
Exchange Traded
Fund 1,610,050 -- -- 1,610,050
Preferred Stock -- -- 26,400(1) 26,400
Corporate Notes/Bonds -- 36,413,501 900,000(2) 37,313,501
----------- ----------- ---------- -----------
Total Investments in Securities $50,844,976 $36,413,501 $1,072,875 $88,331,352
=========== =========== ========== ===========
|
Level 1 Level 2 Level 3 Total
------------ ------------ ---------- -----------
Liabilities
Written Options $138,800 $-- $-- $138,800
-------- --- --- --------
Total Liabilities $138,800 $-- $-- $138,800
======== === === ========
|
(1) Classified as Financial
(2) Classified as Paper & Forest Products
33 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
The following is a reconciliation of the investments in which significant
unobservable inputs (Level 3) were used in determining value:
Common Corporate Preferred
Stock Notes/Bonds Stock Total
--------- ----------- --------- -----------
BEGINNING BALANCE AS OF 11/30/09 $ 471,900 $850,000 $ 776,000 $ 2,097,900
Realized gain (loss) -- -- -- --
Change in unrealized
appreciation (depreciation) (436,425) 50,000 (749,600) (1,136,025)
Net purchase/sales 70,950 -- -- 70,950
Net transfers in/and or out of
Level 3 40,050 -- -- 40,050
--------- -------- --------- -----------
ENDING BALANCE AS OF 5/31/10 $ 146,475 $900,000 $ 26,400 $ 1,072,875
========= ======== ========= ===========
Changes in unrealized
gains/(losses) included in
earnings related to
securities still held at
reporting date $(396,375) $50,000 $(749,600) $(1,095,975)
========= ======== ========= ===========
|
The inputs or methodology used for valuing securities are not necessarily an
indication of the risks associated with investing in those securities.
For the six months ended May 31, 2010, there have been no significant changes to
the Fund's fair value methodologies.
CASH AND CASH EQUIVALENTS: Idle cash may be swept into various money market
funds and is classified as cash equivalents on the Schedule of Investments.
Amounts invested are generally available on the same business day.
WRITTEN OPTIONS: When the Fund writes a covered call option, an amount equal to
the premium received by the Fund is included in the Fund's Statement of Assets
and Liabilities as a liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option written.
When a covered written call option expires on its stipulated expiration date, or
if the Fund enters into a closing purchase transaction, the Fund will realize a
gain (or loss if the cost of the closing purchase transaction exceeds the
premium received when the call option was written) without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option will be extinguished. When a covered written call option is
exercised, the Fund will realize a gain or loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received. The Fund, as writer of an option, has no control over whether the
underlying securities may be sold (called) and as a result bears the market risk
of an unfavorable change in the price of the securities underlying the written
option.
The Fund is permitted to write covered call options on equity securities or
stock indexes. The Fund writes covered call options to enhance return through
price appreciation of the option, increase income, hedge to reduce overall
portfolio risk
34 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
and/or hedge to reduce individual security risk. As of May 31, 2010, the Fund
had $138,800 in covered call options written representing 0.2% of the Fund's net
assets.
DIVIDENDS AND DISTRIBUTIONS: The Fund will declare and pay dividends to
shareholders on a monthly basis. Net long-term capital gains, if any, in excess
of capital loss carryforwards are distributed to shareholders annually.
Dividends from net investment income and capital gain distributions, if any, are
determined in accordance with U.S. Federal income tax regulations, which may
differ from GAAP. Dividends and distributions, if any, to shareholders are
recorded on the ex-dividend date.
The Fund currently intends to distribute a monthly fixed amount to shareholders.
The Fund's final distribution for each calendar year may exceed that amount,
however, to the extent necessary for the Fund to have distributed all of its net
investment company taxable income and net capital gains recognized during the
year, if any. If, for any calendar year, the total distributions exceed current
and accumulated earnings and profit, the excess, distributed from the Fund's
assets, will generally be treated as a tax-free return of capital and will
result in a reduction in the shareholder's basis. The Board reserves the right
to change the aforementioned dividend policy from time to time.
BORROWINGS: During the reporting period, the Fund issued short-term commercial
paper at a discount from par. The discount was amortized to interest expense
over the life of the commercial paper using the straight-line method. In
conjunction with the issuance of the commercial paper, the Fund entered into a
line of credit arrangement with a bank for $25 million. Effective April 26,
2010, the Fund terminated its commercial paper program and borrowed $20 million
pursuant to this line of credit, using $10 million to pay down the remaining
outstanding commercial paper and using $10 million for investment purposes. The
line of credit bears a variable interest rate equal to the 1-month LIBOR Market
Index Rate plus 0.90% per annum. As of May 31, 2010, $20 million in borrowings
was outstanding. The borrowings under the line of credit are secured by a
perfected security interest on all of the Fund's assets, and there is a 0.10%
per annum commitment fee on the unused balance.
ILLIQUID SECURITIES: A security is considered illiquid if it cannot be sold or
disposed of in the ordinary course of business within seven days or less for its
approximate carrying value on the books of the Fund. Valuations of illiquid
securities may differ significantly from the values that would have been used
had an active market for these securities existed. The total value of illiquid
securities as of May 31, 2010 was $146,475 or 0.2% of net assets.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are recorded
on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
on the accrual basis. The Fund accretes original issue discount on securities
using the effective interest method.
35 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
FEDERAL INCOME TAXES: It is the Fund's intention to continue to meet the
requirements under Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to distribute substantially all of its
taxable income to shareholders. Therefore, no provision for Federal income or
excise tax is required.
The Fund evaluates tax positions taken or expected to be taken in the course of
preparing the Fund's tax returns to determine whether it is "more-likely
than-not" (i.e., greater than 50-percent) that each tax position will be
sustained upon examination by a taxing authority based on the technical merits
of the position. Tax positions not deemed to meet the more-likely-than-not
threshold are recorded as a tax benefit or expense in the current year. The Fund
did not record any tax provision in the current period. However, management's
conclusions regarding tax positions taken may be subject to review and
adjustment at a later date based on factors including, but not limited to,
examination by tax authorities (i.e., the last 3 tax year ends, as applicable),
on-going analysis of and changes to tax laws, regulations and interpretations
thereof.
INVESTMENTS IN REAL ESTATE INVESTMENT TRUSTS ("REITS"): With respect to the
Fund, dividend income is recorded based on the income included in distributions
received from the REIT investments using published REIT reclassifications
including some management estimates when actual amounts are not available.
Distributions received in excess of this estimated amount are recorded as a
reduction of the cost of investments or reclassified to capital gains. The
actual amounts of income, return of capital, and capital gains are only
determined by each REIT after its fiscal year-end, and may differ from the
estimated amounts.
INVESTMENT COMPANY SECURITIES AND EXCHANGE-TRADED FUNDS: The Fund may invest in
shares of other registered investment companies, including exchange-traded funds
("ETFs") within the limitations prescribed by the 1940 Act. ETF shares are
traded like traditional equity securities on a national securities exchange or
NASDAQ. The Fund will indirectly bear its proportionate share of any management
fees and other expenses paid by such other investment companies, which will
increase expenses and decrease returns.
INVESTMENTS IN PREFERRED TERM SECURITIES ("PTSS"): The Fund can invest in
Preferred Term Securities, a type of collateralized debt obligation ("CDO"). A
PTS is a trust collateralized by a pool of capital securities of affiliated
holding corporations, typically of, but not limited to, smaller to medium sized
banks and insurance companies.
The income tranche of these securities, that may be owned by the Fund, receives
residual cash disbursements after the senior tranches are paid a stated rate of
interest. Dividend income from these securities is recorded based on anticipated
cash flows and the internal rate of return of each PTS. Distributions received
in excess of this estimated amount are recorded as a reduction of the cost of
investments or reclassified to capital gains. The actual amounts of income,
return of capital, and capital gains are only determined by each PTS quarterly,
and may differ from the estimated amounts.
36 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
In addition to the normal risks associated with fixed income securities (e.g.,
interest rate risk and default risk), PTSs carry additional risks including, but
not limited to: (i) the possibility that distributions from collateral
securities will not be adequate to make interest or other payments; (ii) the
quality of the collateral may decline in value or default; (iii) the Fund may
invest in PTSs that are subordinate to other classes; and (iv) the complex
structure of the security may produce disputes with the issuer or unexpected
investment results. As of May 31, 2010 there were no holdings in Preferred Term
Securities.
NOTE 2. INVESTMENT MANAGEMENT, ADMINISTRATION, CUSTODIAN AGREEMENTS AND OTHER
TRANSACTIONS WITH AFFILIATES
The Fund has entered into an investment management agreement with Chartwell
Investment Partners, (the "Manager"). The Manager manages the Fund's portfolio
and makes investment decisions. For these services, the Fund pays the Manager a
monthly fee at an annual rate of 0.95% of the Fund's Managed Assets. "Managed
Assets" are the average weekly value of the Fund's total assets minus the sum of
the Fund's liabilities, excluding debt related to leveraging, short-term debt
and the aggregate liquidation preference of any outstanding preferred stock. The
Manager has agreed to limit the investment management fee paid to it by the Fund
to 0.85% of the Fund's Managed Assets. This waiver is voluntary and may be
changed at any time.
The Fund has entered into an administration agreement with SEI Investments
Global Funds Services (the "Administrator"). Under such agreement, the
Admin-istrator performs or arranges for the performance of certain
administrative services necessary for the operation of the Fund. The Fund pays a
fee to the Administrator based on the Fund's Managed Assets according to the
following rates: 0.10% on the first $250 million of such Managed Assets and
0.09% on such Managed Assets in excess of $250 million, subject to a minimum
annual fee of $150,000.
Certain officers and/or directors of the Fund are officers and/or directors of
the Manager. The Fund pays each director, who is not an "affiliated person" as
defined in the Act (a "Disinterested Director"), a fee of $2,000 for each
regular Board Meeting attended, $750 for each special Board Meeting attended,
plus $1,000 per year for audit committee members. Each Disinterested Director is
reimbursed for reasonable out-of-pocket expenses associated with attending Board
and Committee Meetings.
For the six months ended May 31, 2010, the Fund incurred a legal expense of
$73,820 for services provided by Drinker Biddle & Reath LLP, counsel for the
Fund. A partner of the firm is an officer of the Fund.
Wells Fargo Bank N.A. serves as the custodian for the Fund. The Custodian plays
no role in determining the investment policies of the Fund or which securities
are to be purchased or sold by the Fund.
37 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
NOTE 3. PURCHASE AND SALES OF INVESTMENTS
For the six months ended May 31, 2010, purchases and sales of investments,
excluding short-term investments, totaled $33,569,443 and $25,403,838,
respectively.
The following table summarizes the Fund's call options written for the six
months ended May 31, 2010:
NUMBER OF
CONTRACTS PREMIUMS
--------- -----------
Options outstanding, November 30, 2009 .. 1,695 $ 137,078
Options written ......................... 36,703 1,895,077
Options expired ......................... (23,297) (1,150,396)
Options exercised ....................... 1,787 113,407
Options closed .......................... (15,538) (801,269)
------- -----------
Options outstanding, May 31, 2010 ....... 1,350 $ 193,897
======= ===========
|
NOTE 4. INTEREST EXPENSE
Effective with the commercial paper maturity date of April 26, 2010, the Fund
terminated the commercial paper program. The Fund utilized a line of credit
arrangement to pay down the $10,000,000 commercial paper outstanding and to
borrow an additional $10,000,000 for investment purposes, bringing the total
leverage as of May 31, 2010 to $20,000,000. The line of credit bears a variable
interest rate equal to the 1-month LIBOR Market Index Rate plus 0.90% per annum.
For the semi-annual period ended May 31, 2010, the Fund had $127,903 in Interest
Expense, representing $105,380 from the commercial paper program and $22,523
from the line of credit.
NOTE 5. CAPITAL STOCK
There are 100,000,000 shares of $0.01 par value common stock authorized. Of the
16,905,967 shares of common stock outstanding at May 31, 2010, the Manager owned
25,242 shares.
For the six months ended May 31, 2010 and the year ended November 30, 2009, the
Fund issued no shares in connection with the Fund's dividend reinvestment plan.
NOTE 6. MARKET AND CREDIT RISKS
The Fund may invest in high yielding fixed-income securities, which carry
ratings of BB or lower by S&P and/or Ba1 or lower by Moody's. Investments in
these higher yielding securities may be accompanied by a greater degree of
credit risk than higher rated securities. Additionally, lower rated securities
may be more susceptible to adverse economic and competitive industry conditions
than investment grade securities. The Fund may invest up to 15% of its total
assets in illiquid securities and other securities which may not be readily
marketable. In addition, the Fund may purchase securities sold in reliance of
Rule 144A of the Securities Act of 1933. The relative illiquidity of some of the
Fund's portfolio securities may adversely affect the ability of the Fund to
dispose of such securities
38 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
in a timely manner and at a fair price at times when it might be necessary or
advantageous for the Fund to liquidate portfolio securities.
NOTE 7. FEDERAL TAX INFORMATION
In accordance with accounting pronouncements, the Fund has recorded several
reclassifications in the capital accounts. These reclassifications have no
impact on the net asset value of the Fund. These differences, which may result
in distribution reclassifications, are primarily due to ordinary gain from the
sale of master limited partnerships, return of capital and expiration of capital
loss carryover. As of November 30, 2009, the Fund recorded the following
reclassifications to increase (decrease) the accounts below:
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT REALIZED PAID-IN
INCOME GAIN CAPITAL
-------------- ----------- -----------
$2,188,332 $5,748,049 $(7,936,381)
|
The tax character of dividends and distributions paid during the last two fiscal
years were as follows:
ORDINARY RETURN
INCOME OF CAPITAL TOTALS
--------- ---------- -----------
2009 $6,607,782 $ 289,851 $ 6,897,633
2008 9,913,146 4,609,079 14,522,225
|
As of November 30, 2009, the components of Accumulated Losses were as follows:
Capital loss carryforwards $ (99,053,980)
Post-October losses (220,759)
Net unrealized depreciation (2,615,571)
Other temporary differences (244,104)
-------------
Total accumulated losses $(102,134,414)
=============
|
Post-October losses represent losses realized on investment transactions from
November 1, 2009 through November 30, 2009, that in accordance with federal
income tax regulations the Fund may elect to defer or treat as having arisen in
the following fiscal year.
The following summarizes the capital loss carryforwards as of November 30, 2009.
These capital loss carryforwards are available to offset future net capital
gains.
EXPIRING IN FISCAL YEAR AMOUNT
----------------------- -----------
2010 $30,533,344
2011 771,608
2014 103,382
2016 16,849,903
2017 50,795,743
-----------
Total capital loss carryforwards $99,053,980
===========
|
During the year ended November 30, 2009, the Fund utilized none of the capital
loss carryforwards to offset capital gains, $7,900,696 of the capital loss
carryforward expired in the current year.
39 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
The Federal tax cost as well as the aggregate gross unrealized appreciation and
depreciation on investments excluding written options held by the Fund at May
31, 2010, were as follows:
Federal Tax Cost ......................... $88,629,913
-----------
Aggregate Gross Unrealized Appreciation .. 7,714,323
Aggregate Gross Unrealized Depreciation .. (8,012,884)
-----------
Net Unrealized Depreciation .............. $ (298,561)
===========
|
NOTE 8. SUBSEQUENT EVENTS
The Fund has evaluated the need for disclosures and/or adjustments resulting
from subsequent events through the date the financial statements were issued.
Based on this evaluation, no adjustments were required to the financial
statements as of May 31, 2010. However, the following are details relating to
subsequent events that have occurred since May 31, 2010:
The Board of the Fund declared the following dividends:
DECLARATION DATE EX-DATE RECORD DATE PAYABLE DATE DIVIDEND RATE
---------------- ------------- ------------- ------------- -------------
June 1, 2010 June 15, 2010 June 17, 2010 June 30, 2010 $0.034
July 1, 2010 July 20, 2010 July 22, 2010 July 30, 2010 0.034
|
The Fund's transfer agent PNC Global Investment Servicing Inc. was acquired by
Bank of New York Mellon Corp. (BNY Mellon) effective July 1, 2010.
NOTE 9. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
NOTE 10. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In January 2010, the Financial Accounting Standards Board issued Accounting
Standards Updated No. 2010-06, "Improving Disclosures About Fair Value
Measurements" ("ASU"). The ASU requires enhanced disclosures about (1) transfers
into and out of Levels 1 and 2 and (2) purchases, sales, issuances, and
settlements on a gross basis relating to Level 3 measurements. The first
disclosure is effective for the first reporting period (including interim
periods) beginning after December 15, 2009, and the second disclosure will be
effective for fiscal years beginning after December 15, 2010, and for interim
periods within those fiscal years. Management is currently evaluating the impact
the adoption of this ASU will have on the Fund's financial statement
disclosures.
40 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
AUTOMATIC DIVIDEND REINVESTMENT PLAN (UNAUDITED)
Pursuant to the Fund's Automatic Dividend Reinvestment Plan (the "Plan"), unless
a shareholder otherwise elects, all dividend and capital gains distributions
will be automatically reinvested in additional shares of common stock of the
Fund by BNY Mellon, prior to July 1, 2010 known as PNC Global Investment
Servicing, as agent for shareholders in administering the Plan (the "Plan
Agent"). Shareholders who elect not to participate in the Plan will receive all
dividends and distributions in cash, paid by check mailed directly to the
shareholder of record (or, if the shares are held in street or other nominee
name, then to such nominee) by BNY Mellon, as dividend paying agent. Such
participants may elect not to participate in the Plan and to receive all
distributions of dividends and capital gains in cash by sending written
instructions to BNY Mellon, as dividend paying agent, at the address set forth
below.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by written notice if received by the Plan
Agent not less than ten days prior to any dividend record date. Otherwise such
termination will be effective with respect to any subsequently declared dividend
or distribution.
Whenever the Fund declares a distribution, an ordinary income dividend or a
capital gain dividend (collectively referred to as "dividends") payable either
in shares or in cash, non-participants in the Plan will receive cash, and
participants in the Plan will receive the equivalent in shares of common stock.
The shares will be acquired by the Plan Agent for the participant's account,
depending upon the circumstances described below, either (i) through receipt of
additional unissued but authorized shares of common stock from the Fund or (ii)
by purchase of outstanding shares of common stock on the open market on the NYSE
or elsewhere. If on the payment date of the dividend, the net asset value per
share of the common stock is equal to or less than the market price per share
plus estimated brokerage commissions (such condition being referred to herein as
"market premium"), the Plan Agent will invest the dividend amount in newly
issued shares on behalf of the participant. The number of newly issued shares of
common stock to be credited to the participant's account will be determined by
dividing the dollar amount of the dividend by the net asset value per share on
the date the shares are issued, provided that the maximum discount from the then
current market price per share on the date of issuance may not exceed 5%. If on
the dividend payment date the net asset value per share is greater than the
market value (such condition being referred to herein as "market discount"), the
Plan Agent will invest the dividend amount in shares acquired on behalf of the
participant in open-market purchases.
In the event of a market discount on the dividend payment date, the Plan Agent
will have until the last business day before the next date on which the shares
trade on the "ex-dividend" basis or in no event more than 30 days after the
dividend payment date to invest the dividend amount in shares acquired in
41 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
(UNAUDITED)
open-market purchases. If, before the Plan Agent has completed its open-market
purchases, the market price of a share of common stock exceeds the net asset
value per share, the average per share purchase price paid by the Plan Agent may
exceed the net asset value of the Fund's shares, resulting in the acquisition of
fewer shares than if the dividend had been paid in newly issued shares on the
dividend payment date. The Plan provides that if the Plan Agent is unable to
invest the full dividend amount in open-market purchases during the purchase
period or if the market discount shifts to market premium during the purchase
period, the Plan Agent will cease making open-market purchases and will invest
the uninvested portion of the dividend amount in newly issued shares at the
close of business on the last purchase date.
The Plan Agent maintains all shareholders' accounts in the Plan and furnishes
written confirmation of all transactions in the accounts, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent on behalf of the Plan participant,
and each shareholder's proxy will include those shares purchased or received
pursuant to the Plan. The Plan Agent will forward all proxy solicitation
materials to participants and vote proxies for shares held pursuant to the Plan
in accordance with the instructions of the participants.
In the case of shareholders such as banks, brokers or nominees which hold shares
for others who are the beneficial owners, the Plan Agent will administer the
Plan on the basis of the number of shares certified from time to time by the
record shareholders as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who are to
participate in the Plan.
There will be no brokerage charges with respect to shares issued directly by the
Fund as a result of dividends or capital gain distributions payable either in
shares or in cash. However, each participant will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open-market
purchases in connection with reinvestment of dividends.
The automatic reinvestment of dividends and distributions will not relieve
participants of any Federal, state or local income tax that may be payable (or
required to be withheld) on such dividends.
Shareholders participating in the Plan may receive benefits not available to
shareholders not participating in the Plan. If the market price plus commissions
of the Fund's shares is above the net asset value, participants in the Plan will
receive shares of the Fund at less than they could otherwise purchase them and
will have shares with a cash value greater than the value of any cash
distribution they would have received on their shares. If the market price plus
42 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
(UNAUDITED)
commissions is below the net asset value, participants will receive
distributions in shares with a net asset value greater than the value of any
cash distribution they would have received on their shares. However, there may
be insufficient shares available in the market to make distributions in shares
at prices below the net asset value. Also, since the Fund does not redeem its
shares, the price on resale may be more or less than the net asset value.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants in the Plan; however, the Fund reserves the right
to amend the Plan to include a service charge payable by the participants.
All correspondence concerning the Plan should be directed to the Plan Agent at
BNY Mellon, P.O. Box 43027, Providence, RI 02940-3027, Attn: Closed-End
Department.
FEDERAL TAX INFORMATION (UNAUDITED)
Information for Federal income tax purposes is presented as an aid to
shareholders in reporting the dividend distributions for the six months ended
May 31, 2010.
ADDITIONAL INFORMATION (UNAUDITED)
During the period, there have been no material changes in the Fund's investment
objective or fundamental policies that have not been approved by the
shareholders. There have been no changes in the Fund's charter or By-Laws that
would delay or prevent a change in control of the Fund which have not been
approved by the shareholders. There have been no material changes in the
principal risk factors associated with investment in the Fund.
EFFECTS OF LEVERAGE (UNAUDITED)
As of May 31, 2010, the Fund utilized a line of credit to borrow $20 million at
a variable interest rate equal to 1.25%% per annum and a 0.10% per annum
commitment fee on the $5 million unused balance. The Fund must experience an
annual return of 0.28% to cover interest payments and commitment fees on the
line of credit.
The following table explains the potential effects of leverage on the equity
returns of common shareholders:
Assumed return on portfolio
(net of expenses).......... (10.00)% (5.00)% 0.00% 5.00% 10.00%
Corresponding return to common
Stockholder................ (13.22)% (6.79)% (0.36)% 6.06% 12.49%
|
43 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
(UNAUDITED)
Assumes $70 million assets attributable to common shareholders; $20 million
aggregate leverage with an average interest rate of 1.25%. All figures appearing
above are hypothetical returns generated to assist investors in understanding
the effects of leverage. Actual returns may be greater or less than those
appearing in the table.
HOW TO OBTAIN A COPY OF THE FUND'S QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q within sixty days after the end of the period. The Fund's Forms N-Q are
available on the Commission's website at http://www.sec.gov, and may be reviewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
HOW TO OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICIES
A description of the policies and procedures that are used by the Fund's
investment adviser to vote proxies relating to the Fund's portfolio securities
as well as information relating to how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available (i) without charge, upon request, by calling the Fund toll-free at
(866) 585-6552; (ii) on the Fund's website at www.chartwellip.com; and (iii) on
the SEC's website at http://www.sec.gov.
44 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
CHARTWELL BOARD CONSIDERATIONS RELATING TO THE ADVISORY CONTRACT RENEWAL
(UNAUDITED)
The Board of Directors of the Fund determined on April 21, 2010 whether to renew
the Advisory Agreement with Chartwell Investment Partners, LP ("Chartwell
Partners") (the "Agreement"). Prior to making its determination, the Board
received detailed information from Chartwell Partners, including, among other
things, information provided by Lipper, Inc. ("Lipper") comparing the
performance of the Fund for the one, two, three, four and five year periods
ended February 28, 2010 to the performance of an income and preferred stock
universe selected by Lipper and a leveraged high yield universe selected by
Lipper at the request of Chartwell Partners; a competitive group analysis
prepared by Chartwell Partners analyzing the differences in the investment
strategies, quality and performance of the Lipper peer groups as compared to the
Fund, advisory fee and other expense information for the Fund as compared to the
Lipper peer groups; and information provided by Chartwell Partners responsive to
requests by the Fund's independent counsel for certain information to assist the
Board in its considerations. In addition, the Board reviewed a memorandum from
its independent counsel detailing the Board's duties and responsibilities in
considering renewal of the Agreement.
In reaching its decision to renew the Agreement, the Board, including a majority
of the Directors who are not interested persons under the Investment Company Act
of 1940 (the "Independent Directors"), considered, among other things: (i) the
nature, extent and quality of Chartwell Partners' services provided to the Fund;
(ii) the experience and qualifications of the portfolio management team; (iii)
its investment philosophy and process; (iv) Chartwell Partners' assets under
management, client descriptions and performance record for each of its
investment strategies; (v) its annual compliance summary; (vi) its soft dollar
commission, broker selection, best execution and trade allocation policies;
(vii) current advisory fee arrangements with the Fund and its other clients;
(viii) Lipper information comparing the Fund's performance, advisory fee and
expense ratio to that of its Lipper peer groups and a competitive group analysis
prepared by Chartwell Partners; (ix) Chartwell Partners' financial information
and profitability analysis related to providing advisory services to the Fund,
including the commission arrangement with Merrill Lynch; (x) any compensation
and other possible benefits to Chartwell Partners arising from its advisory and
other relationships with the Fund; and (xi) the extent to which economies of
scale are relevant to the Fund. The Board noted, in particular, the Fund's
unique expenses relative to the Lipper peer groups and the impact of the unique
investment strategy of the Fund and the commission arrangement with Merrill
Lynch whereby Chartwell Partners has been paying the underwriter's commission in
connection with the Fund's initial public offering on the comparability of the
Lipper peer groups to the Fund.
45 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
During the course of its deliberations, the Board, including a majority of
Independent Directors, reached the following conclusions, among others,
regarding Chartwell Partners and the Agreement: the Fund's advisory fee and
expense ratio are above average in comparison to those of the Lipper peer groups
and both are reflective of the unique and bifurcated investment style and types
of expenses of the Fund; Chartwell Partners' fees for managing the Fund are
reasonable as compared to fees it charges for managing assets for other clients
and considering the unique investment strategy of the Fund; the Fund's
performance is generally lower than that of the Lipper peer groups which is
reflective of the comparably smaller investment by the Fund in lower quality
bonds and preferred stocks that posted exceptional performance last year; the
nature, extent and quality of services provided by Chartwell Partners in
advising the Fund was satisfactory; although Chartwell Partners recorded a
slight loss in 2009 after allocating expenses and overhead, the profits earned
by Chartwell Partners over the lifetime of the Fund seemed reasonable; and the
benefits derived by Chartwell Partners from managing the Fund, including its use
of soft dollars and the way it selects brokers, seemed reasonable. The
Independent Directors discussed economies-of-scale, but noted that asset growth
to achieve such economies was unlikely for a closed-end fund such as the Fund.
Based on the factors considered, the Board, including a majority of the
Independent Directors, concluded that it was appropriate to renew the Agreement.
46 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
SHAREHOLDER VOTING RESULTS (UNAUDITED)
The Annual Meeting of shareholders of the Fund was held on April 21, 2010 at the
offices of PNC Global Investment Servicing, 103 Bellevue Parkway, Wilmington,
Delaware. The description of the proposal and number of shares voted at the
meeting are as follows:
VOTES VOTES VOTES
FOR AGAINST WITHHELD
---------- ------- --------
To elect the following
director to serve as the
Class II director for a
three-year term expiring
in 2013: Bernard P. Schaffer 14,236,550 0 685,353
|
Directors whose terms of office continue beyond this meeting are Winthrop S.
Jessup, Marie D. Fairchild, Kenneth F. Herlihy and C. Warren Ormerod.
47 | CHARTWELL
CHARTWELL DIVIDEND AND INCOME FUND, INC. MAY 31, 2010
DIRECTORS
Winthrop S. Jessup, Chairman
Marie D. Fairchild
Kenneth F. Herlihy
C. Warren Ormerod
Bernard P. Schaffer
OFFICERS
Winthrop S. Jessup, President
G. Gregory Hagar, Vice President, Treasurer, Chief Financial Officer and Chief
Compliance Officer
Bernard P. Schaffer, Vice President
Kevin A. Melich, Vice President
Timothy J. Riddle, Vice President
Andrew S. Toburen, Vice President
Michael P. Malloy, Secretary
Maria E. Pollack, Assistant Secretary
INVESTMENT MANAGER
Chartwell Investment Partners, L.P.
1235 Westlakes Drive, Suite 400
Berwyn, PA 19312
ADMINISTRATOR
SEI Investments Global Funds Services
One Freedom Valley Drive
Oaks, PA 19456
CUSTODIAN
Wells Fargo Bank, NA
733 Marquette Avenue
Minneapolis, MN 55479
TRANSFER AGENT
BNY Mellon
P.O. Box 43027
Providence, RI 02940-3027
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young, LLP
2001 Market Street, Suite 4000
Philadelphia, PA 19103
LEGAL COUNSEL
Drinker Biddle & Reath LLP
One Logan Square
Suite 2000
Philadelphia, PA 19103
This report, including the financial statements herein, is transmitted to the
shareholders of Chartwell Dividend and Income Fund, Inc. It is not a prospectus,
circular or representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance results should
not be considered a representation of future performance. Statements and other
information contained in this report are as dated and are subject to change.
Past performance is no guarantee of future results. Share prices will fluctuate,
so that a share may be worth more or less than its original cost when sold. The
investment adviser's commentaries included in this report contain certain
forward-looking statements about the factors that may affect the performance of
the Fund in the future. These statements are based on Fund management's
predictions and expectations concerning certain future events and their expected
impact on the Fund, such as performance of the economy as a whole and of
specific industry sectors, changes in the levels of interest rates, the impact
of developing world events and other factors that may influence the future
performance of the Fund. Management believes these forward-looking statements to
be reasonable, although they are inherently uncertain and difficult to predict.
Actual events may cause adjustments in portfolio management strategies from
those currently expected to be employed.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase, from time to time, shares of its
common stock in the open market.
ITEM 2. CODE OF ETHICS.
Not applicable for semi-annual report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for semi-annual report.
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) The schedule of investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to shareholders
filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for semi-annual report.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable for semi-annual report.
(b) Paul A. Matlock is no longer a Portfolio Manager of the Registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's Board of Directors since the Registrant
last provided disclosure in response to the requirements of Item 407(c)(2)(iv)
of Regulation S-K in its proxy statement filed with the Commission on March
13,2010.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive officer and principal financial officer
have concluded that the Registrant's disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended,
(the "1940 Act")) are effective as of a date within 90 days of the filing
of this report that includes the disclosure required by this paragraph, based on
their evaluation of these controls and procedures, required by Rule 30a-3(b)
under the 1940 Act and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended.
(b) There were no changes in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during
the second fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEMS 12. EXHIBITS.
(a)(1) Not applicable for semi-annual report.
(a)(2) A separate certification for the principal executive officer and the
principal financial officer of the Registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are
attached hereto as EX-99Cert.
(a)(3) Not applicable.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing
as EX-99.906Cert.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Chartwell Dividend and Income Fund, Inc.
By (Signature and Title)* /s/ Winthrop S. Jessup, President
----------------------------------------
Winthrop S. Jessup, President
(Principal Executive Officer)
Date: August 1, 2010
|
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Winthrop S. Jessup, President
----------------------------------------
Winthrop S. Jessup, President
(Principal Executive Officer)
Date: August 1, 2010
|
By (Signature and Title)* /s. G. Gregory Hagar
----------------------------------------
G. Gregory Hagar, Vice President and CFO
(Principal Financial Officer)
|
Date: August 1, 2010
* Print the name and title of each signing officer under his or her
signature.
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